The week beginning the 20 January has been a studded with landmark bond issuances making headlines and headway’s in the international markets. These range from East African issuances to the Kingdom of Saudi Arabia. Closing the week will be Zambia’s first bond sale of 2020 at which it will seek to redeem last years dismal performance.
Eighty million dollars’ worth on East African currency denominated bonds invaded the British market after two bonds of $40million each were listed on the London Stock Exchange – LSE earlier in the week. The ‘Aaa /AAA’ World Bank (International Bank for Reconstruction and Development – IBRD) listed a RWF37.2billion ($40million equivalent) 3yr bond priced at 9.25% coupon on the LSE as Kenya’s Arcon Ltd made a KES4billion ($40million equivalent) 4yr appearance in the international capital markets with an infrastructure green bond at a pricing of 12.25%. This was a remarkable experience for the Kenyan and Rwandese heads of states on the sidelines of the UK-Africa Investment Summit.
RWANDA: This is a very big step for the Dubai of Africa, Rwanda, whose economic velocity has made enough noise in the Africa space across all sectors. A Rwandese bond trading on the LSE deepens liquidity and visibility prospects for the east African nation whose offshore local currency bond appetite is just 4.8% due to lack of visibility. With a 2019/ 2020 budget that has lined up expansionary infrastructure projects, the World Bank will allow proceeds of this bond to be used for budget funding and this will help manage financial risk as the bonds are local currency denominated. The successful listing of the Rwandese bond reflects the Worlds Banks confidence in the economic trajectory of Rwanda and projected recognition of its journey to be Africa’s economic giant. Three (3) year pricing of 9.25% is fairly reasonable pricing for a local currency denominated bond. The bond settles on 24 January and will be ready for trading.
KENYA: Kenya decided to use the green route to attract subscription for the KES4billion ($40million) issuance. Kenya has bonds listed on the LSE but this green debut fixed income security listing is very important for East Africa’s largest economy as it is the first international issuance since the 2016 banking failures of Chase and Imperial Banks. The success of the issuance is a litmus test of the confidence offshores still have in Kenya. The 4yr bond was issued at a discount rate of 12.25% whose proceeds will go towards green infrastructure student project funding.
SAUDI ARABIA: Saudi Arabia issued $5billion worth of 7,12 and 35yr euronotes as it seeks to plug a budget deficit as a part of a $32billion funding program lined up this year for local and foreign currency issuances. The oil dependent kingdom sold 7yr $1.25billion paper at 2.54%, 12yr $1billion paper at 2.88% and $2.75billion paper at 3.84%. Saudi’s Arabia late last year offloaded 1.5% of Aramco shares to raise $25.6billion in the state owned entity valued at $1.7trillion to $2.3trillion dollars. This bond issuance is the biggest Eurobond issuance in 2020 and comes at time after geopolitical tension has eased post US – Iran air strikes.
ZAMBIA: Zambia will be looking to redeem its dismal bond market performance for 2019 as it attempts to sell a third of a yard (K300million) of local currency bonds on Friday 24 January. Clad with sovereign and energy price risks exacerbated by balance sheet vulnerabilities and receding dam levels, investors will be looking for opportunity to reprice the term structure of interest rates reflective of perceived risks. Last primaries had the 5yr priced at 33%. Given a market liquidity position north of K830million, the auction is poised to have adequate purchasing power for a full subscription.
The Kwacha Arbitrageur
