Angola would not have been on many betting slips as the borrower to restart bond issuance from the CEEMEA region. But an orderly and contained reaction to the war in the Middle East means the market did not require a top rated issuer to bring primary back to life.
Angola’s dollar dual trancher on Tuesday was the first public benchmark from a CEEMEA issuer since the conflict started on February 28.
Tradition in emerging markets primary has been that after a crisis it is the top rated, most familiar issuers that restart the primary market.
This happened last year. The primary market shut for nearly three weeks after US President Donald Trump’s tariff announcements on April 2 and the first trades were senior sukuk from the Gulf, investment grade corporates and sovereigns and Adnoc, the double-A rated oil giant.
There are several reasons why an issuer of such calibre was not required this time around.
The first is that the sell-off in EM bonds this month has been noticeable, but not alarming.
Gulf issuers have borne the brunt, as one might expect, particularly the sub-investment grade real estate companies. But for most issuers we are talking tens of basis points of widening, not hundreds.
Ditto outside of the Gulf. Frontier emerging markets, which contain some of the weakest Eurobond issuers, have not endured a brutal flight by investors.
Kenya has suffered more than most because of its reliance on energy imports from the Gulf. The yield on its eight year bonds printed in February is 120bp higher since the war started. Not great, but not terrible.
Some, like Kenya, have fared worse than others, but no sovereigns have suffered the hundreds of basis points of widening that happened after Trump’s tariffs.
The second reason is that an oil price shock creates winners and losers. After "liberation day", there were only losers.
Angola is one of those winners. It will earn a big revenue windfall from the higher oil prices, and its Eurobond yields have fallen and its spreads tightened since the start of the war.
The last reason a top CEEMEA issuer did not need to restart supply is that some cannot, and others would not want to.
Plenty of CEEMEA’s best credits are in the Gulf, and they are not going to issue while war is raging nearby. Investors may not be receptive given the uncertainty, and spread-sensitive issuers will be reluctant given spreads have widened by tens of basis points. That is not much for an issuer like Angola, but a lot for Abu Dhabi.
And for others in CEEMEA, like central and eastern European sovereigns, they do not need to issue. They have already printed plenty this year and can wait for months before they need to issue again.
GlobalCapital argued last week that the Gulf primary market needed a show-stopping deall to restart and that argument still stands.
But wider CEEMEA did not, which is why Angola has the honour of kicking issuance off again after a lengthy pause.