Bloomberg News

Turkey to Mexico Sell About $5 Billion of Debt on Yields

April 09, 2013

Bank of Japan Governor Haruhiko Kuroda

Investors are pouring into emerging markets in the hunt for higher yields as Bank of Japan Governor Haruhiko Kuroda sets about reviving the world’s third-biggest economy with an unprecedented bond buying program.Photographer: Haruyoshi Yamaguchi/Bloomberg

Turkey, Mexico and Ukraine sold the equivalent of almost $5 billion in bonds abroad, taking advantage of the biggest drop in emerging-market borrowing costs since 2008.

Mexico raised 1.6 billion euros ($2.1 billion) in its first sale of a new euro-denominated bond in three years yesterday, while Turkey sold $1.5 billion of 30-year dollar debt, the longest maturity since 2011, data compiled by Bloomberg show. Ukraine issued $1.25 billion of debt one day before International Monetary Fund officials leave the country, and Lebanon is planning to sell more of its 2023 and 2027 dollar notes, according to a person familiar with the offering.

Developing-government debt yields plunged to an average 4.56 percent April 8 from 4.84 percent April 1, the largest proportional five-day decline since December 2008, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index. Yields of 6.74 percent for junk-rated Ukraine offer investors 601 basis points, or 6.01 percentage points, over U.S. Treasuries.

“There is essentially a growing belief that the current ultra-low interest-rate environment is staying with us for quite a while,” Robert Reichle, who manages $450 million in emerging- market bonds as a senior portfolio manager at Joh Berenberg Gossler & Co. in Hamburg, said by e-mail yesterday. “Investors are looking for the highest yield they can get in fundamentally sound countries, for a reasonable amount of risk -- Turkey and Mexico are such an example.”

Investors are pouring into emerging markets in the hunt for higher yields as Bank of Japan (8301) Governor Haruhiko Kuroda sets about reviving the world’s third-biggest economy with an unprecedented bond buying program.

Buy Back

Mexico sold 10-year bonds at a yield 120 basis points above the benchmark mid-swap rate, according to data compiled by Bloomberg. In addition, the country will buy back euro- denominated bonds due 2013, 2015, 2017 and 2020 April 15, according to a PR Newswire statement issued yesterday.

The nation’s yields have plunged from around 4.3 percent, or a 180 basis point spread, for July 2017 bonds the last time the government tapped the euro market in 2010.

Turkey issued 30-year dollar-denominated notes to yield 4.95 percent. The rate on debt due in January 2041 has fallen 34 basis points this month to 4.83 percent. That compares with 6.61 percent at the end of January 2011, according to data compiled by Bloomberg.

IMF Mission

Ukraine sold dollar bonds with a yield of 7.5 percent, data compiled by Bloomberg show. The country, which raised the same amount last November at a yield of 7.8 percent, is hosting an IMF mission in Kiev this week for talks on a stand-by loan. It is rated B3 by Moody’s Investors Service, six levels below investment grade.

Lebanon held a final round of investor meetings in Beirut yesterday to reopen its 2023 and 2027 dollar bonds, according to the person with knowledge of the sale, who asked not to be identified because terms aren’t yet set. Separately, Lebanon’s Finance Ministry said yesterday that it plans to issue as much as $1.5 billion of bonds in exchange for local-currency debt with the central bank.

Indonesia raised $3 billion in 10- and 30-year dollar bonds April 8, tapping the global market for the first time this year, Robert Pakpahan, director general at the debt management office, said in an interview. The Dominican Republic is meeting investors for a possible dollar bond sale, a person familiar with the plans said.

While the proportional five-day drop in yield for developing-nation debt was the most since 2008, the 28.5 basis- point decline was the biggest point retreat since October 2011, JPMorgan indexes show. Also stoking demand for emerging-market debt are the Federal Reserve’s asset purchases known as quantitative easing.

“This is QE causing a flood of capital into emerging markets,” Tim McCarthy, who oversees more than $1 billion of emerging-market assets at Valartis Asset Management in Geneva, said by e-mail. “It could be a great month given the low starting point after Cyprus knocked us down.”

To contact the reporters on this story: Lyubov Pronina in London at lpronina@bloomberg.net; Gavin Serkin in London at gserkin@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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