CEE Bonds

Rating agency Moody’s has slapped beleaguered Russian private bank Otkritie with a two notch rating downgrade this week, as subordinated debt holders in the bailed out bank look set to take heavy losses.

Ukraine is understood to have picked banks for its first Eurobond since 2013, and following a massive rally of the sovereign’s bonds, its reception in the market is expected to be strong.

The dry spell is over for investors in emerging market debt with several mandates hitting the screens on Tuesday. The first trades will be eagerly watched as a barometer for new issue premiums after a summer that has seen escalating geopolitical tensions and further questions about the direction of travel of both the European Central Bank and the US Federal Reserve.

Emerging market bonds remain set for a busy September as weak US data pushed dulled expectations of Federal Reserve rate hikes, outweighing escalating tensions between the US and Korea, and the Kenyan Supreme Court's decision to annul the result of the August 8 election.

Russian aluminium producer Rusal priced its second Panda bond of the year on September 1, reopening the market after a quiet month.

With a GDP per capita of just $796, and foreign exchange reserves that cover just 9% of debt obligations, the Republic of Tajikistan cannot claim to be a frontier market, let alone an emerging market country. But that should be no obstacle as the Central Asian state approaches a bond market that has seen Belarus and Iraq raise debt with ease in recent months.

International Bank of Azerbaijan (IBA) is expected to launch three new bonds on Friday that have been born out of a restructuring of $3.34bn of the bank’s debt.

Bank of Russia (CBR) has stepped in to help stricken Otkritie, in what is the first bail-out of a systemically important bank in Russia, and arguably the largest Russian bank failure in history.

News of Otkritie’s bail-out has filled the buy-side with questions about the nature of the Centra Bank of Russia’s recovery plans sending Otkritie’s subordinated bonds yo-yoing between a cash price of 49 and low to mid 80s.

Tajikistan has named two lead banks for its first ever bond, the proceeds of which will be used to partially fund a hydropower plant project.

Yields on subordinated bonds issued by Otkritie remained at over 40% on Tuesday after rumours of bail-out plans by the Russian Central Bank hit the market on Friday.

Otkritie Bank this week offloaded a 19.85% stake in Cypriot RBC Bank in a move that analysts said was an attempt to ease liquidity concerns after what had been a volatile few weeks for the lender. But they dismissed concerns over the sector as being overblown, saying any problems were largely confined to Otkritie.