Armenia Joins Montenegro to Sell Bonds, Tapping Lower CostsMaciej Onoszko, Lyubov Pronina and Sara Khojoyan
Armenia and Montenegro are the latest countries from eastern Europe seeking to tap financial markets as the euro area begins an unprecedented bond-buying program and the U.S. moves closer to raising interest rates.
Montenegro in the Balkans raised 500 million euros ($531 million) in the sale of five-year bonds priced to yield 4 percent on Thursday, according to a person familiar with the offering. Armenia, a former Soviet republic, appointed banks to arrange meetings with investors next week for a dollar issue, said another person with knowledge of the deal.
The countries joined Croatia and Bulgaria this month looking to issue debt as central banks in Europe and Asia ease policy to thwart deflation, jump starting the slowest beginning to a year in bond sales since 2009. Borrowing costs in euros have dropped to record lows as the region’s central bank started a 1.1 trillion-euro quantitative-easing program this week while signs of growth in the U.S. boost speculation the Federal Reserve will raise rates this year for the first time since 2006.
“They are trying to access markets while financing is still cheap and available,” Tim Ash, chief emerging-market economist at Standard Bank Plc in London, said by e-mail on Thursday. Armenia is “trying to get some insulation after the fallout from the Russia-Ukraine crisis,” while Montenegro “has lots of plans for investments in energy and infrastructure,” he said.
Fed Chair Janet Yellen said last month in testimony before Congress that the central bank will be flexible with its timing of rate increases and make sure the U.S. economy can handle higher borrowing costs before raising rates. European Central Bank Executive Board member Benoit Coeure said on Thursday that the euro area bought 9.8 billion euros of bonds in the program’s first three days.
Armenia mandated Deutsche Bank AG, HSBC Holdings Plc and JPMorgan Chase & Co. to arrange a series of meetings with investors in the U.S. and London, according to the person who wasn’t authorized to speak publicly on the deal. The country also announced a tender for $200 million of its $700 million September 2020 bonds, the person said on Thursday. The offer expires on March 18. The yield on the securities fell 23 basis points to 6.62 percent on Thursday.
Montenegro’s sale was managed by Citigroup Inc., Deutsche Bank, Erste Group Bank AG and Societe Generale SA, the person said. The yield on its euro-notes maturing in 2019 rose three basis points to 3.8 percent.