Africa? We wish!

Rwanda, marico, RWANDA!
Rwanda, marico, RWANDA!
El día que nos africanicemos será un día de fiesta…

I keep promising Juan I’ll stop boring readers with these bond stories, but then I can’t resist. Check out today’s New York Times story on the superhot market for African sovereign debt:

Ghana raised about $1 billion with a coupon, or interest rate, of 8.125 percent on a bond coming due in 2026; it is now trading just below 8 percent, compared to about 2.3 percent for an analogous United States Treasury bond.

Ivory Coast priced a 10-year bond more favorably this summer at 5.6 percent, despite defaulting three years ago during a civil war. Investors have become more bullish since the fighting ended and political tensions have eased. The yield on the bond is now slightly above 6 percent.

For reference, Venezuela’s 2027 bonds are now yielding 17.7%.

Did you catch that? Venezuela is now seen as around three times riskier than an African country that defaulted amid civil war just three years ago.

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  1. Yields are forward looking my friend. They tell you where we are going and not where we are. Therefore, we should quit being such pansies and default already

  2. The current picture of Venezuelan govt bond prices is shameful. It speaks more about the incompetence, negligence, lack of credibility and generally terrible management of market expectations from the policymakers of this government, than about Venezuela’s state of the economy and capacity to pay.

    Case in point: Venezuela has 5 state banks (plus a parafiscal fund and a multibillion oil behemoth) with huge portfolios of its own debt, all of them with enough assets on books to work as market makers for Vene – PDVSA debt, and with clear ability to exert market power and guide price levels on bonds, as well as to make substantial trading revenues.

    The reality: There’s no coordination between the public banks, no strategy and almost no active trading. All of them resort to imperialist investment banks to trade bonds (paying about 1,00% per trade on bid-offer spreads), and since SITME was shut down, the trading flow has diminished a lot, so now the market for Venz is very illiquid.

    If you combine the incompetence at the top with a dysfunctional and illiquid market, adding on top the known economic problemas and lack of data transparency, even a blog post with bogus “facts” by some Harvard economists is going to hit hard on bond prices, and that translates into stratospheric rises on yields.

  3. Today, Venezuela is nothing but lies and broken promises. Until this stops being the case why would any honest person or any company that had to follow Corrupt Foreign Practices guidelines invest a penny in Venezuela? It is a no brainer, just as simple as avoiding any and all Nigerian 419 scams>

  4. Pundits are saying that Moody’s will downgrade Brazil to ‘junk status’ if Dilma gets reelected, with harsh impacts in all region. I wonder what is that Venezuelan yield going to be if that actually happens. It seems paradoxical, but Dilma’s victory will be indeed terrible to Maduro and the Venezuelan economy as a whole.

  5. While we are on the topic of Africa…….

    Venezuelan gov’t to send 20 physicians to Africa

    “The group of Venezuelan physicians has volunteered to join the supporting contingent against ebola in Africa,” said the Venezuelan president


    Friday October 24, 2014 05:24 PM

    Wonder what they might bring back to Venezuela with them. Oh I forgot, Maburro is totally prepared.


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