Armenian, Azeri Bonds Tumble as Death Toll Mounts From Clashes

  • Biggest one-day jump in Armenian yields since mid-December
  • Azeri bonds pare losses after both sides call for cease-fire

Armenian and Azeri bonds dropped for a second day after clashes between the two ex-Soviet republics over the disputed Nagorno-Karabakh territory threatened to spill over into a politically sensitive region.

The yield on Armenia’s Eurobonds maturing in September 2020 climbed 16 basis points on Tuesday to 6.52 percent at 7 p.m. in the capital Yerevan, set for the worst day since mid-December. The rate on Azerbaijan’s March 2024 note initially also rose 15 basis points, paring the increase to nine basis points at 5.71 percent after both sides agreed on a cease-fire. Both securities traded at their lowest yield in at least four months just before the violence flared.

Investors started ditching the two nations’ sovereign debt on Monday after dozens of people were reported dead and Armenia warned that the worst fighting in the area in two decades could spiral into a “full-scale war” in a region flanked by Russia, Turkey and Iran. The conflict dates back to the dying days of the Soviet Union, when a dispute over the territory flared into a war that killed 30,000 and created a million refugees. This week’s fighting is the worst since a Russian-brokered truce 22 years ago.

“The importance of the situation should not be underestimated," Gintaras Shlizhyus, an analyst at Raiffeisen Bank International AG in Vienna, said in a report to clients earlier on Tuesday. "Both sides of the conflict are demonstrating strong military resolve."

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