A few bears may be starting to rear their heads in emerging markets, but if the African Eurobond market is any guide, they’re easily outnumbered by bulls.
West African neighbors Benin and Ghana issued $3.6 billion-worth of bonds on Tuesday, and demand was sky-high as investors heartened by a dovish tilt from world’s largest central banks rushed to lock in some of the juiciest yields across developing nations.
For Benin, an economy of barely $10 billion that’s rated four steps into junk, the sale was its first foray into the market. Ghana’s bumper sale was even more impressive, with investors looking past its volatile currency and the risk of a fiscal splurge before elections next year.
Benin attracted more than 1 billion euros ($1.1 billion) of orders for a 500 million-euro sale at a yield of 6 percent. Investors placed $20 billion of bids for Ghana’s $3 billion offering, with yields ranging from 7.875 percent for a seven-year tranche to 8.95 percent for 31-year notes.
“I’m not surprised” Ghana’s deal was heavily oversubscribed, said Kevin Daly, a money manager at Aberdeen Standard Investments in London, which oversees $730 billion of assets, including African debt. “They will be in comfortable position not to overspend on the deficit target next year.”
If the world’s central banks turn less dovish, Africa could be one of the first places to suffer. But for now, emerging-market traders are convinced its high risks are outweighed by its returns.