Bolivia Pays Half of Venezuelan Rates in Bond Market Return

Bolivia returned to the international bond market for the first time since the 1920s, selling $500 million of 10-year debt at half the yields its ally Venezuela pays.

Bolivia sold the bonds to yield 4.875 percent, according to data compiled by Bloomberg. That rate is less than the 6.11 percent yield on similar-maturity Serbian bonds, which share Bolivia’s BB- rating from Standard & Poor’s. Venezuelan dollar bonds due 2023, which are rated one level below at B+, yield 10.99 percent, according to data compiled by Bloomberg.

Bolivia is joining countries from Angola to Zambia in selling international bonds as near-zero benchmark rates in the U.S. and Europe fuel demand for higher-yielding assets. The average yield on emerging-market government bonds fell to a record low 4.59 percent last week, according to JPMorgan Chase & Co.’s EMBI indexes.

“The grab for yield remains in place,” Edwin Gutierrez, who helps manage $9 billion of developing nation debt at Aberdeen Asset Management Plc in London, said in a phone interview. Investors are looking “for anything these days that has a modicum of yield.”

President Evo Morales, a 52-year-old ally of Venezuelan President Hugo Chavez, is issuing dollar bonds as Bolivia’s economy is projected by the International Monetary Fund to grow 5 percent or more for a third straight year. A press official at Bolivia’s Finance Ministry declined to comment.

Rating Boost

S&P raised Bolivia’s credit rating in May to BB-, or three levels below investment grade, citing the country’s falling debt levels and rising international reserves. Debt dropped to the equivalent of 36.6 percent of gross domestic product last year, the lowest level since Bloomberg started compiling the data in 2008.

Aberdeen’s Gutierrez said he wouldn’t buy the bonds because Morales’s interventionist policies are similar to those in Argentina and Venezuela, countries that pay more than double the yield. Morales has seized mines, oil refineries and power companies since taking office in 2006.

“You can look at the debt ratios all you like, but Bolivia is a country that has historically broken private contracts, nationalized various industries,” he said. “Argentina and Venezuela have done the same, but they pay you twice the yield.”

Bank of America Corp. and Goldman Sachs Group Inc. arranged the sale. Kerrie McHugh, a spokeswoman at Bank of America, and Michael Duvally, a spokesman at Goldman Sachs, declined to comment.

Angola, which is also rated BB- by S&P, sold in August $1 billion of debt in the form of loan participation notes maturing in seven years to yield 7 percent for its first overseas issue. Guatemala and Aruba also returned to the bond market this year.

To contact the reporter on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net Drew Benson in New York at abenson9@bloomberg.net;

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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