Turkey to Mexico Bond Sales Sparked as Emerging Yields SinkLyubov Pronina and Gavin Serkin
Turkey, Mexico, Ukraine and Lebanon are selling bonds as emerging-market nations take advantage of the biggest drop in borrowing costs since 2008, triggered by Japan’s stimulus measures.
Mexico priced its first issue of notes in euros in three years today, while Turkey sold 30-year dollar debt, its longest maturity since 2011, according to data compiled by Bloomberg. Ukraine issued dollar bonds a day before International Monetary Fund officials leave the country. Lebanon’s Finance Ministry is planning to sell more of its 2023 and 2027 dollar notes, according to a person familiar with the offering.
Developing-government yields plunged to an average 4.56 percent late yesterday from 4.84 percent on April 1, the largest proportional five-day decline since December 2008, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index. For investors, yields of 6.74 percent for Ukraine offer 601 basis points, or 6.01 percentage points, more than 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 in e-mailed comments. “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 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.
Mexico sold 1.6 billion euros ($2.1 billion) of 10-year bonds at a yield of 120 basis points above the benchmark mid-swap rate, according to data compiled by Bloomberg.
The country will additionally buy back euro bonds due 2013, 2015, 2017 and 2020 on April 15, according to a statement on PR Newswire today.
Mexico’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 $1.5 billion in 30-year 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.
Ukraine raised $1.25 billion from bonds to yield of 7.5 percent, Bloomberg data 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.
Lebanon held today a final round of investor meetings in Beirut 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 set. Separately, Lebanon’s Finance Ministry said today it plans to issue as much as $1.5 billion of bonds in an exchange for local-currency debt with the central bank.
Indonesia raised $3 billion in 10- and 30-year dollar bonds yesterday, 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.
“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.”