With analysts noting that markets are “taking the Fed’s tightening policy in their stride,” demand for emerging-markets debt is so strong that Bloomberg reports one of Asia’s poorest nations is mulling a debut dollar-bond sale… Papua New Guinea.
The southwest Pacific nation plans to raise $500 million in five-year bonds, central bank governor Loi Martin Bakani said Tuesday at the Credit Suisse Asian Investment Conference in Hong Kong. The country would join Mongolia among sub-investment grade issuers in 2017. Sales of high-yield bonds total almost $15 billion so far this year, according to data compiled by Bloomberg.
“There is strong appetite for frontier issues — and markets have taken the Federal Reserve tightening policy in their stride,” Stuart Culverhouse, chief economist at Exotix Partners LLP in London, said by phone. Issuers in the single-B tier — the second-highest in the junk rating scale — have found yields “are not prohibitively high for their financing needs,” he said.
Papua New Guinea aims to woo buyers from Asia, Europe and the U.S. for its bond sale in the second half of the year. This isn’t the country’s first attempt, after it hired banks in 2013 for an issue of dollar-denominated securities that didn’t pan out, despite the same confidence from bankers…
“Increasing signs of improvement in the global economy have made investor appetite for riskier assets resilient,” said Rees Kam, a strategist at SJS Markets Ltd., a Hong Kong-based financial services company that specializes in fixed income.
“There’s demand from yield-seeking investors and they have to move to a lower credit rating to pick up some extra yield. Countries going to the market are trying to benefit from the rising demand for lower-credit products.”
Success this time would follow several years of current-account surpluses for the natural-resource dominated economy — though the period has seen slower growth and wider fiscal deficits.
Mongolia, which has been struggling with a shrinking economy, ballooning budget deficit and debt downgrades, benefited from a rebound in copper and the prospect of an International Monetary Fund rescue package to pull off its sale of $600 million seven-year debt earlier this month.
Sri Lanka is also planning a $1.5 billion bond sale.
The big question now is – when does North Korea come to the market? Think of all that uranium collateral?