CEE Bonds

Russia's releasing of a request for proposals for a new bond was greeted by incredulity last Monday, as the timing of the RFP coincided with troops rolling into Crimea. At first glance it did not seem the best time for the country to be asking banks to pitch to help it raise its next slug of funding, but for several reasons it makes sense for Russia.

Russia has released a request for proposals for banks to organise its latest bond issue in dollars and possibly euros, according to two bankers in London.

Azerbaijan started execution on its first ever benchmark bond on Monday morning, ending a six day drought for CEEMEA supply.

With Russia tightening its grip in Crimea and no signs of the tensions in Ukraine easing, it's been hard to escape the feeling of doom and gloom in the EM bond markets. But light can be found even on the darkest of days. Here are five reasons to be cheerful.

New Zealand lender Kiwibank sold its first senior unsecured Swiss franc bond on Thursday. The issuer's solid credit rating and lack of outstanding debt allowed a solid success in spite of volatility earlier in the week.

US financial sanctions on Russia may be a remote possibility, according to emerging markets analysts, but if measures were imposed, the country's bond issuers' would find it very hard to fund internationally. Russian bank plans to expand abroad would also be derailed, and US banks with large exposures to the country could also be hit.

Syndicate bankers are primed for a busy period in dollars next week following the smooth execution of four benchmarks in the currency this week despite uncertainty and volatility caused by the situation in Ukraine.

Investors have been wringing their hands about secondary trading of EM bonds recently. Violent price action fosters illiquidity and makes new issues tough to execute. Russia’s altercation with Ukraine is just the latest driver of that. But the real problem that EM desks are going to face is not disruption, but the potential lack of bond and loan business as growth slows.

Undaunted by Turkey’s domestic economic and political uncertainty, the country’s participation banks are lining up to to hit the international market with deals, say bankers. Turkiye Finans looks likely to lead the pack and could bring both a dollar sukuk and murabaha financing.

A European Union support package for Ukraine could add an extra €1.6bn to the issuer’s funding programme this year — but the form of the extra fund raising will be dependent on the pace at which Ukraine receives the funds. A benchmark deal, taps of existing trades or private placements could all form part of the issuer’s new plans.

Rating: Aa2/-/-

The focus on Ukraine has moved from the macroeconomic to military sphere. But it is worth remembering that even if full scale conflict with Russia is averted, Ukraine’s economy is in an appalling state, and the bond market helped it end up there.