Despite Few Economic Reforms, Ghana's Bonds Are Suddenly in Demand
08 Settembre 2016 - 11:47PM
Dow Jones News
By Julie Wernau and Christopher Whittall
Ghana hasn't done that much over the past year to curb its
double-digit inflation, rein in its debt or steady its shaky
economy.
What has changed is that investor demand for the country's bonds
is suddenly booming as money managers scour the globe for yield
during a period of rock-bottom interest rates.
Ghana on Thursday sold $750 million in six-year bonds at 9.25%
yield. Interest in the debt was so strong that the government
received more than $4.5 billion in orders from investors, according
to people familiar with the sale. That demand enabled Ghana to
reduce the yield it offered from the 9.5% to 10% early price
talk.
"There's desperation to buy anything with a coupon," said Paul
McNamara, a portfolio manager at GAM Holding. Ghana's high-yield
credit rating is on review for downgrade by two credit-rating
firms, and the country has a big current-account deficit, he
added.
"This is not a poster child for emerging-market reform by any
means," Mr. McNamara said. "I'd take this as a sign that people
aren't looking beyond the coupon."
The strong appetite for Ghana's debt marks a sharp reversal from
less than a year ago, when the country struggled to place a $1
billion bond offering.
In October, the West African country of 27 million had to reduce
its debt offering by one-third and increase interest payments to
10.75%, up from its original target of 8.5% to 9%. The government
also needed to secure a World Bank guarantee for $400 million of
the 15-year debt to win over investors.
Ghana's bond sale is the latest example of emerging-market
countries -- some of which have struggled to sell debt in the
recent past -- cashing in at a time when much of the developed
world offers low or negative interest rates.
"If you think about the five-year space and where rates are in
general in the credit world, 9.25% is pretty appealing," said Marco
Santamaria, a New York-based money manager at AllianceBernstein LP,
who helps manage about $22 billion in emerging market debt.
Riskier bonds from countries like Argentina and Zambia, which a
year ago also had trouble selling debt, have outperformed most
other emerging markets amid global demand for their high-yield
bonds.
In Ghana, analysts say, the government's effort to boost the
economy and attract capital has had mixed results. The
International Monetary Fund predicted in April that the country's
budget deficit would drop to 3.9% of gross domestic product in
2016, compared with 5.1% in 2015. Meanwhile, inflation dipped from
18.4% year over year in July to 16.7% in August.
But Ghana also defied the IMF, which had asked the country to
bar its central bank from lending money directly to the government
to cover its deficit. Instead, the government passed a law to cap
spending, stalling the approval of its most recent review with the
IMF.
"Our view tends to be that things in Ghana are getting better.
But I wouldn't say things are night-and-day different than last
year," said John Ashbourne, economist at Capital Economics Ltd in
London.
Marco Ruijer, an emerging-market debt portfolio manager at NN
Investment Partners, decided to take a pass on the bonds after the
coupon dropped below original guidance.
"Last time they needed the World Bank guarantee and it was still
a 10.75% coupon," he said. "Times are changing."
Write to Julie Wernau at Julie.Wernau@wsj.com and Christopher
Whittall at christopher.whittall@wsj.com
(END) Dow Jones Newswires
September 08, 2016 17:32 ET (21:32 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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