Benin’s plan for $750m bond sale in jeopardy amid rising yields
Benin’s opportunity to issue $750 million in bonds is shrinking as yields approach levels that previously forced African borrowers to halt their financing plans.
Bloomberg reports that the government began marketing the debt last week, with a Finance Ministry official stating that the sale will occur when market conditions are favourable.
The average yield on African sovereign dollar bonds has increased by 55 basis points since reaching a two-year low on December 9, according to the Standard Bank Africa Sovereign Yield Index. The current yield stands at 9.15%.
In April 2022, similar conditions led African nations to pause eurobond market activities until improvements were seen last year, with Ivory Coast issuing debt at the start of 2024.
Yields are reflecting those in the US, driven by concerns that strong economic data and President-elect Donald Trump’s potentially inflationary policies will support the Federal Reserve’s cautious approach to further rate cuts. This has also strengthened the dollar, increasing the cost of existing debt for sovereigns.
Simon Quijano-Evans, chief strategist at Gramercy Ltd., told Bloomberg that current market dynamics may lead some African nations to delay debt sales until the market stabilizes.
Most sub-Saharan African sovereigns do not face maturities until the fourth quarter, allowing them to wait and see if US Treasury yields ease in the first half of the year.
“At the moment, it looks as though we’ll see considerably more in the way of amortizations and coupon payments than issuance out of Africa in the external bond space this year,” Quijano-Evans said. “That should provide some extra support to sub-Saharan African sovereigns coming to market in 2025 as cash is put to work again.”
In addition to Nigeria and South Africa, countries such as Angola, Cameroon, Ivory Coast, and Namibia may also tap the market this year, Quijano-Evans added.
