Already a Bloomberg.com user?
Sign in with the same account.
Ukraine, the lowest-rated country to sell debt abroad this year, issued $1.25 billion of bonds to tap demand from investors seeking higher returns amid record-low yields for emerging-market debt.
The former Soviet republic, rated four levels below investment grade by Standard & Poor’s at B+, priced 10-year notes yesterday to yield 7.8 percent, or 6.187 percentage points above similar maturity U.S. Treasuries, according to data compiled by Bloomberg. Poland sold 750 million euros ($957 million) of 12-year euro-denominated securities yesterday.
Demand for emerging-market debt is increasing as investors seek alternatives to near-zero benchmark interest rates in Europe and the U.S. The average yield on bonds sold by developing countries fell to a record low of 4.59 percent on Oct. 16, according to data compiled by JPMorgan Chase & Co.
Emerging-market issuers have raised a record $394.4 billion selling debt abroad this year, compared with $278.2 billion in all of 2011, according to data compiled by Bloomberg. The Polish bonds sold yesterday yield 1.35 percentage point more than euro mid-swaps, down from a spread of 1.43 percentage point when it sold bonds on Oct. 2.
Ukraine’s economy contracted 1.3 percent in the third quarter from the same period last year as demand for exports slumped. The central bank’s reserves plunged 8.5 percent last month to $26.8 billion, the lowest since May 2010, as policy makers spent to prop up the national currency, the hryvnia. Ukraine will have to repay more than $1.7 billion in debt coming due by March, according to Kiev-based Dragon Capital.
Ukrainian dollar-denominated bonds due in 2017 rose, pushing yields down to 7.353 percent, to the lowest level since Nov. 8, according to data compiled by Bloomberg. The national currency, the hryvnia, strengthened to 8.1625 per dollar as of 2:10 p.m. in Kiev.
Yesterday’s sale was the third for Ukraine this year. The country tapped international debt markets in July, when it sold $2.6 billion of Eurobonds due 2017 at a yield of 9.25 percent. It also sold $1 billion of Eurobonds in August maturing in 2014 at a yield of 7.95 percent. It issued 10-year bonds in 2007 to sell 6.75 percent, according to data compiled by Bloomberg.
JPMorgan (JPM), Morgan Stanley (MS), OAO Sberbank, and VTB Capital arranged yesterday’s sale, according to people close to the transaction who asked not be identified because they’re not allowed to speak publicly on the matter.
S&P rates Ukraine at B+. Both Fitch Ratings and Moody’s Investors Service classify it one level lower, five steps short of investment grade.
Bond-buying programs by the Federal Reserve and the European Central Bank that have suppressed bond yields are also attracting non-frequent issuers to sell debt abroad. Bolivia, rated BB- by S&P, sold its first dollar bond abroad since the 1920s on Oct. 22 to yield 4.875 percent. Paraguay is planning its first international bond sale, according to people familiar with the matter.
Kenya, Rwanda, Tanzania, Uganda and Mozambique may also sell their first foreign-currency bonds in the “next few years,” according to a Moody’s report dated Oct. 3.
To contact the reporters on this story: Steven Fromm in New York at firstname.lastname@example.org; Daryna Krasnolutska in Kiev at email@example.com
To contact the editor responsible for this story: Balazs Penz at firstname.lastname@example.org