A slip of the tongue from President Lukashenko gooses Belarus bond yields above 50%
On Thursday, January 29th, President Alexander Lukashenko said Belarus may consider restructuring its foreign-debt obligations this year as $4 billion of payments fall due. His comments immediately sparked a major selloff in Belarus bonds. Within a half an hour, prices on Belarus’s dollar debt quickly tumbled by more than 20 cents.
Lukashenko offered a clarification some time later, saying he didn’t mean “restructuring” the country’s debt, he meant “refinance” the debt. Belarus bonds bounced back to just 10 cents down within a few hours, but are still well off their Wednesday closing price. At one point the yield on 2015 Belarus debt rose above 60%
Dan Loeb's Third Point returned 11% in its flagship Offshore Fund and 13.2% in its Ultra Fund for the first quarter. For April, the Offshore Fund was up 1.7%, while the Ultra Fund gained 2.3%. The S&P 500 was up 6.2% for the first quarter, while the MSCI World Index gained 5%. Q1 2021 hedge Read More
Comments from analysts
“The mounting uncertainty about the fallout from Russia’s financial crisis across the entire CIS region naturally increases investors’ sensitivity to negative news flow,” noted Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, an an e-mail on the subject of the Belarus bonds selloff. “Volatility has returned with a vengeance.”
Michael Ganske, an executive at $7 billion in emerging-market bonds and currencies at Rogge Global Partners Plc in London, commented in an e-mail that President Lukashenko’s gaffe “brought again to the focus of investors that Belarus too, and not just Ukraine, has a debt-sustainability problem.”
Russia’s economic woes weighing on Belarus bonds
Russia’s worsening economic is leading to problems for ex-Soviet nations such as Belarus, which sends almost 50% of its exports to Russia. Of note, the Belarusian ruble has lost almost 30% of its value against the dollar in the last couple of months, forcing the central bank to jack up interest rates to 25% a couple of weeks ago.
The 2015 Belarus bonds dropped the most since they were sold in 2010. While Belarus’s $800 million of January 2018 notes trimmed it’s losses after Lukashenko spoke again, the yield on that issue was also up substantially.
In his second speech, Lukashenko, Belarus’s long-term leader, said the nation has enough money pay back all of its debts. Bloomberg data show that the nation has $5 billion of debt and interest payments due this year.
“Please calm down,” Lukashenko urged bondholders in his later remarks.