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Ghana Eurobond Yield Heads Toward Record Low, Standard Bank Says

Ghana’s Eurobonds are set to extend their rally, pushing yields toward a record low by the end of the year as rising risk appetite boosts demand for African sovereign debt, Standard Bank Plc said.

The yield on the government’s 8.5 percent dollar bonds due 2017 may drop as low as 5.75 percent by Dec. 31, Stephen Bailey- Smith, an emerging-markets strategist at Standard Bank in London, wrote in an e-mail today. The bonds rose for a third week, lowering the yield 70 basis points, or 0.70 percentage point, to 6.143 percent by 12:32 p.m. in Accra, the capital. The yield hit a record-low 5.729 percent on Aug. 4.

“The rally is broadly in line with other African sovereign Eurobonds and sovereign Eurobonds more widely,” Bailey-Smith said. “It is also partly a product of some optimism that the Eurozone policy makers would prevent any major dislocation in the Eurozone financial system.”

Global markets climbed yesterday after EU leaders agreed to bolster lenders’ capital and boost the region’s rescue fund in a bid to stem the debt crisis.

The cedi slid 0.3 percent against the dollar today to 1.6005, taking its loss this week to 0.6 percent. The central bank has been selling dollars to slow the currency’s decline as the cedi slipped as low as 1.6411 per dollar on Oct. 17, the weakest since at least 1994 when Bloomberg began compiling the data.

Ghana’s inflation rate held at 8.4 percent for a third month in September as falling food prices curbed price growth. The central bank kept its key interest rate at 12.5 percent for the second consecutive meeting on Oct. 19.

The economy of the West African nation is expected to grow 13.6 percent this year from 7.7 percent in 2010 as it began producing oil for export at its Jubilee field on Dec. 15, 2010.

The sovereign bonds will return to the yield range “that has dominated between April and August, assuming a more supportive risk climate into the end of 2011,” Bailey-Smith said.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.

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