Africa Eurobond Yields Surge as Investors Sell Ghana to Gabon

Sub-Saharan African Eurobonds fell, pushing yields higher this week as investors selling the debt of the continent’s crude producers extended the rout across the region.

An index of African sovereign dollar debt yields rose eight basis points to 5.63 percent as of 12:57 p.m. in London, the highest since March 20, according to JPMorgan Chase & Co. indexes. The gauge climbed 49 basis points this week, the most since the period ending June 21.

Crude’s plunge below $65 a barrel prompted investors to sell assets from oil-producing countries including Nigeria and Gabon. Yields on Ghanaian debt due August 2023 surged 55 basis points today to 9.61 percent, the highest on a closing basis since Feb. 24. While oil producers have led declines, debt from Senegal to Zambia joined the losses this month.

“The market is catching up and being more realistic,” Razia Khan, head of Africa economic research at Standard Chartered Plc, said by phone from London. Low yields for many first-time African issuers in the past two years showed “how stretched valuations were relative to a more consistent perception of the creditworthiness of African sovereigns,” she said.

Among sub-Saharan African dollar bond issuers, only debt from South Africa and Namibia are rated above junk, according to Standard & Poor’s. Ghana was cut one level in October to B-, six steps below investment grade, while Nigeria is three notches higher at BB-. Ethiopia, which sold debut Eurobonds earlier this month at a 6.625 percent coupon, is rated B at S&P.

The dollar debt of Gabon lost 6.8 percent in the week through yesterday, more than any developing nation except Venezuela and Ecuador, according to Bloomberg indexes.

To contact the reporter on this story: Paul Wallace in London at pwallace25@bloomberg.net

To contact the editors responsible for this story: Vernon Wessels at vwessels@bloomberg.net Emily Bowers, Chris Kirkham

Sources: Bloomberg.com

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