C&B Notes

Ghana Reach for Yield

With the U.S. Federal Reserve Board announcement that it is pausing rate increases and will soon stop shrinking its balance sheet, investors’ reach for yield could continue unabated.  A huge over-subscription for Ghana’s just-issued 30-year bond, now the longest-maturity bond in Africa, has the West African country’s financial leadership contemplating a 50-year version.

Ghana says it wants to push the boundaries of the sub-Saharan African debt markets by issuing a 50-year bond, fresh after selling a debut ultra-long bond to investors thirsty for yield.  Accra completed a $3bn bond sale on Tuesday with an order book exceeding $21bn.  The government had been expecting to sell the longest tranche, a 31-year bond, at an annual yield of at least 9.5 per cent.  However, demand for the debt was so strong that the final coupon was cut to 8.95 per cent.  “We thought we would get quite a lot of orders but seven times oversubscription is quite massive,” Charles Adu Boahen, Ghana’s deputy finance minister, told the Financial Times.  The world’s second-largest producer of cocoa is now aiming to become the first African nation to issue a 50-year bond.  “I think right now a 50-year bond is very possible, but the question is at what price,” Mr Adu Boahen said.  “This is a market-sounding exercise and there’s encouraging appetite.”

The sale comes at a time when yields on offer in developed markets are close to historic lows, dragged down by bearish talk from central banks including the U.S. Federal Reserve and the European Central Bank.  Ghana’s success came despite the country’s volatile currency, the cedi, tumbling 17 per cent against the U.S. dollar this year, a decline that accelerated after the Bank of Ghana cut rates at the end of January.


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