Kazakhstan Offers $4 Billion Record Bond Sale

ASTANA – Kazakhstan offered $4 billion in bonds July 14, a record for the state and made the nation the first among developing counties to take advantage of the calming effect following the recolution of the debt crisis in Greece. Kazakhstan had $2.5 billion in 10-year bonds at 285 basis points over U.S. treasuries and $1.5 billion in 30-year notes at 335 basis points over their U.S. equivalent.

Minister of Finance Bakhyt Sultanov.

Minister of Finance Bakhyt Sultanov.

“A request was to the amount of $10 billion. I can say that Kazakhstan offered bonds very successfully. This is the first offering after a long period of time of uncertainty with Greece and negotiations held with Iran,” said Minister of Finance Bakhyt Sultanov, according to Tengrinews.

He also noted the bond offering gave investors the opportunity to assess risks in Kazakhstan.

“We continue to offer bonds in accord with the programme, showing and creating yield curve. This is a good evaluation of investors’ risks for Kazakhstan. The creation of the yield curve is very important not only for Kazakhstan investors, but also for emitters in the quasi-public sector and private companies,” added Sultanov.

“The issuance window is opening and the Kazakhstan deal will be a test of the primary-market appetite. I expect demand for both tranches to be strong, as the government seems willing to pay up for the certainty of getting the deal done,” said Mark Baker, who helps oversee $1.5 billion in emerging-market debt at Standard Life Investments Ltd. in London, as reported by Bloomberg.

Kazakhstan returned to the international market after raising $2.5 billion in 10-year and 30-year bonds in October. Developing-nation dollar bonds have rallied this month, with the average yield falling 20 basis points. The yield on the Kazakh dollar bonds due in 2024 traded at 4.88 percent, 78 basis points below this year’s high on Jan. 6. The yield on notes due in 2044 fell one basis point to 6.19 percent from this year’s high on March 18. The yield on both notes rose on Tuesday.

JPMorgan Chase & Co., Citigroup Inc., Kazkommerts Securities and Halyk Finance are arranging the Kazakhstan bond sale.

“As of today, the current situation at the world capital market is very favourable to bond offerings, because interest rates are low and even having rather low credit ratings (Kazakhstan has approximately a ВВВ credit rating), it is possible to attract large sums with low rates. This situation is very profitable for Kazakhstan, which has financial problems with its budget because of low prices for oil, which led to export decrease and affected currency earnings and the balance of payments in general. Taking into account the abovementioned facts, I can say that bond offerings are a sound decision in the conditions,” said Kazakhstan Institute for Strategic Studies chief research fellow Vyacheslav Dodonov, PhD, in an interview on July 21.

Dodonov added bond offerings in the future will depend on the situation with the national budget and need for Kazakh economy support.

“If the state has need in new bond offerings, they will be profitable, too, because the capital market situation will be favourable in the nearest future. As of today, Kazakhstan’s national debt isn’t high and it is possible to increase it within reasonable limits,” he said.

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