EBRD prepares dinar as IADB readies Mexican treasury
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EBRD prepares dinar as IADB readies Mexican treasury

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The European Bank for Reconstruction and Development and the Inter-American Development Bank are on the cusp of completing new developments that should aid the growth of capital markets in developing countries

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The European Bank for Reconstruction and Development is set to complete a decade long project to sell a bond denominated in the Serbian dinar while the Inter-American Development Bank is about to provide a boon to the local Mexican peso market.

Both projects will provide support to capital markets activities in the respective countries, through bringing liquidity and sustainability, while, in the case of the IADB, allowing its clients to borrow directly in their home country.

The EBRD is nearly ready to bring a publicly listed Serbian dinar bond issue to the domestic Serbian market, which will be the latest development in its work to develop local capital markets.

“We’re working on a publicly listed Serbian dinar bond issue for the domestic market,” Isabelle Laurent, deputy treasurer and head of funding at EBRD, told GlobalMarkets. “This will be the first in the currency for a supranational issuer. We hope that we’ll print the note in the next few weeks.”

The issue will be the culmination of a decade of work by the EBRD, which has had its stumbling blocks along the way.

“Issuing local currency bonds in the domestic market can take a long time because of requisite regulatory changes, as well as developments in domestic politics,” said Laurent. “Sometimes the ministry of finance will be more concerned about its own issuance, or sometimes the central bank is more concerned about competition for their domestic banks.”

The deal will be another first for the EBRD, which in June sold its first public bond in Georgian lari, a five year floating rate note linked to the three month rate set by the National Bank of Georgia. EBRD has previously issued in lari, but only through privately placed issues.

PESO PAYS OFF

Across the Atlantic, the Inter-American Development Bank is working on plans to launch a new local currency treasury, which will be its second after establishing one in Brazil.

“We are in the process of setting up local currency treasury in Mexico, hopefully within the next several months, and we already have local currency treasury in Brazil,” Laura Fan, head of funding, treasury division at the IADB, told GlobalMarkets.

“Our liquidity is predominantly in dollars, so by setting up local currency treasuries we can keep liquidity in that particular currency and it provides us more flexibility when lending to our borrowers in local currencies.”

Unlike the EBRD, the IADB’s treasury team does not have a mandate to develop local currency markets — that responsibility lies with the supranational’s lending team — but “obviously by opening these treasuries we may assist with that mandate”, said Fan.

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