Ver Angola


BFA chief economist says that interest rate developments make it difficult for Angola to go to the market

The chief economist at Banco Fomento Angola (BFA) believes that the evolution of interest rates seen in the second half of April is making it more difficult for Angola to issue public debt.

:  Angola Image Bank
Angola Image Bank  

"This change could call into question a potential option of issuing Eurobonds earlier in the year," José Miguel Cerdeira told Lusa, pointing out that "the 'yields' [interest rates] of Angolan debt were progressively heading towards being below 10 percent, which is no longer the case with this change in expectations" of investors.

The evolution of interest rates demanded by investors to transact Angolan public debt, which serves as an indicator for potential new public debt issues, shows values below 10 percent between 19 March and 12 April, having returned to above 10 percent, the value considered as a limit for international emissions, in almost the entire second half of April.

"The prices of Angolan Eurobonds (debt securities issued in foreign currency), together with those of other African and emerging geographies, have been rising since the beginning of the year, related to a conviction on the part of the markets that the Federal Reserve would cut interest rates in the middle of the year", said the economist.

This evolution has an impact on 'yields', which are closely linked to the interest on US issues, which depend on the interest rates in force in the North American economy, said José Miguel Cerdeira.

"This perspective changed a lot between the first and second half of April, which justifies our assessment; the markets are now convinced of later interest rate cuts by the Federal Reserve, and in the case of the Angolan Treasury, we believe that it will not consider issues with yields above 10 percent, and 8-year yields, which were close to 10 percent, possibly signaling a drop in that level, are now clearly above", highlighted the BFA's chief economist in statements to Lusa.

Finance Minister Vera Daves had said in March that the issuance of new debt securities in foreign currency, or 'eurobonds', will depend on the market's appetite for risk and the country's vision.

"We are open to participating, depending on market conditions. Naturally we don't want to participate at a price that puts us in a worse situation than we are. So what we are doing is analyzing the market, analyzing the market's appetite for the risk of Angola", said Vera Daves in an interview with Lusa on the sidelines of meetings of G20 finance ministers and central bank governors, in the Brazilian city of São Paulo, in which she added: "If we understand that the interest rate is unaffordable, we won't go. If we feel that it is a comfortable rate, we will go," she pointed out.

In the interview in São Paulo, in March, Vera Daves de Sousa stated: "The issuance of 'eurobonds' depends on how the country's debt will behave; the market's view of the country is better than it has ever been, but still it is not at the level we would like it to be, so we will continue to observe and manage with other sources of financing until it is possible to resort to that one".

Days later, the Ministry of Finance announced that it intended to carry out "an issue of National Treasury Bonds in Foreign Currency, as part of the strategy to promote the public bonds market".

The operation is open to all interested parties, it was announced at the time, without giving dates or amounts, specifying that the format would be 'Bookbuilding', a process that serves to assess the market's interest in the titles that the issuer wants to place.

Since January, Côte d'Ivoire, Benin and Kenya have issued debt, always with interest rates below 10 percent, marking the return of sub-Saharan Africa to the markets, two years after the last issue.


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