Africa’s Eurobond Love Fest Set to Continue as Issuers Line Up

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By Paul Wallace

Africa’s strong start to the year in the Eurobond market shows little sign of abating.

On Tuesday, Senegal became the continent’s fourth sovereign in succession to attract $10 billion or more of orders when it sold $2.2 billion of euro- and dollar-denominated securities. The West African nation followed Egypt, Nigeria and Kenya, each of which saw investors clamoring to participate in their deals.

African sovereigns have now sold $10.7 billion of Eurobonds in 2018, already more than half the record $18 billion they managed last year and exceeding the total for the whole of 2016.

They’re also becoming bolder: Nigeria, Kenya and Senegal have all issued 30-year tranches for the first time, having limited themselves to maturities of up to 10 years previously.

With the Federal Reserve almost certain to raise interest rates on March 21, and U.S. 10-year yields pushing toward a more-than-four-year high of 3 percent, it would seem that conditions will get tougher for issuers.

But for now Africa has the attraction of high yields. Investors still crave its debt for the simple reason that it offers the highest rates in the world for sovereign Eurobonds. Africa’s debt yields 6 percent on average, compared with 5.5 percent for emerging markets generally and just 4 percent for developing nations in the Asia-Pacific region.
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The strong demand is good news for several countries thinking of tapping the market.

South Africa, which plans to sell $3 billion of external debt in its fiscal year starting April 1, is meeting investors in the U.S. and U.K. next week. Ghana may attempt a $2 billion transaction, Ivory Coast is said to have mandated banks for a euro-denominated bond and Angola is mulling a $2 billion deal. Tanzania also got a first credit rating last week of B1 from Moody’s Investors Service, one level above Kenya and Nigeria, which may be a precursor to a debut Eurobond.

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