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Friday, July 24, 2020/ 06:00PM / United Capital Research / Header
Image Credit: Brand Spur
Early in the
year, activities at the primary Eurobond market were business as usual for SSA
countries. Gabon opened the year with a $1.0bn issuance in Jan-2020, followed
by Ghana with a $3.0bn issuance in Feb-2020. Both auctions were widely
oversubscribed with subscription rates of 3.5x and 4.7x respectively.
At the
secondary market, yields on all the outstanding and new SSA notes re-priced
higher in Q1-2020, owing to the synchronized risk-off sentiments fueled by the
COVID-19 pandemic and the uncertainties involving the impact that it will have
on the economy. However, the large-sized stimulus package unveiled across the
developed market and recent recovery in economic activities, had since refueled
risk-on sentiments by foreign investors, with SSA Eurobond yields declining
from their March-2020 highs.
Looking
ahead, we believe there is still room for new Eurobond issuances in H2-2020.
Although this will depend on the level of improvement seen in both the external
and domestic space, our optimism is buttressed by the recent recovery in
foreign investors' appetite for SSA Eurobond at the secondary market. Also, the
need for most of the SSA economies to plug sizable budget deficit as well as
refinance existing private debt obligations further adds to our optimism. At
the secondary market, we expect interest to be dictated by the level of
recoveries in the key export items of each countries. In all, our outlook for
sustained expansionary monetary policy conditions in advanced economies
(especially in U.S and Europe) should create a bullish bias for investing in
SSA Eurobonds in H2-2020.
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