Economics

Armenia and Kenya Plan to Issue Debt as EM Crisis Eases

Armenia and Kenya Plan to Issue Debt as EM Crisis Eases

In what amounted to the largest single day sale of emerging market bonds this year, Russia raised $7 billion yesterday through 10-year bonds while South Africa sold $2 billion in 12-year bonds. Both countries paid significantly more as rates globally have risen on talks of the Federal Reserve’s bond buying program being tapered.

Russian rates were 5.112%, compared with 4.5% on a similar issuance last year. For South Africa, a 6.06% yield was needed to draw in investors compared to only 4.665% coupon on a similar sale last year.

Despite the higher rates however, the combined issuances are being viewed as a net positive as emerging market bond deals have slowed drastically since the taper talks began in May.

“It feels like the reopening of the emerging-market asset class, the main guys are coming back,” said Angus Halkett, emerging-markets fund manager at Stone Harbor Investment Partners, which manages $63.5 billion in assets.

Worth noting is that Armenia is set to tap the credit markets for the first time ever this month while Kenya is also planning a bond issuance by year’s end. With yields rising and many portfolio managers flush with cash, the emerging market bonds offer a formidable investment.