Rwanda is planning to launch its debut $400 million 10-year Eurobond today, less than two decades (corrects time period) after it was torn apart by genocide. It is the latest chapter in the story of African bond issuance which has stepped up in recent years, exploiting investors’ hunger for yield.
The bond may yield well above 7 percent — attractive at a time when Italian 10-year yields, one of the riskier punts within the euro zone, have fallen below 4 percent. Frontier markets broker Exotix has the Rwandan deal as one of its five fixed income trades to watch. Their analysts say:
Rwanda’s economic fundamentals are not that bad, but potential bond investors will be concerned about aid dependence.
Growth is strong and public debt is moderate, Exotix says, but Rwanda’s current account excluding aid totals 20 percent of GDP, compared with 10 percent if one were to include donors’ assistance. Rwanda’s debt is likely to yield much more than Senegal or Zambia, at 7-8 percent, Exotix adds, as the country’s rating of single-B is one notch lower.
Along with sovereigns such as Angola, Kenya and Nigeria expected to tap the international debt market this year, Exotix is on the look-out for Nigerian banks, after Fidelity Bank said earlier this month it was planning a bond: