CEE Bonds

Diversification has taken hold in central Asia's Uzbekistan, which over the last two years has started its pivot towards international capital markets. According to sources, a plethora of debut deals is expected to hit markets in coming months.

Komerční banka (KB), a partially owned subsidiary of Société Générale, has mandated leads for the first fully distributed euro benchmark covered bond from the Czech Republic, paving the way for other major lenders to follow suit.

The Republic of Slovenia has repeated its 2020 feat of being the first sovereign issuer in CEEMEA to launch a bond by coming to the market with a mandate on Tuesday. Despite the apparent rush for bond funding, however, many believe that EU funding will provide some of what CEE countries would otherwise have taken from public bond markets.

Hungary has no plans to issue wholesale bonds in foreign currency markets next year, having raised more debt than expected in euros and yen in 2020.

During last January’s conference in Vienna, we felt that sentiment around CEE was mostly optimistic, but — to be frank — slightly unenthusiastic. It seemed as though everybody was expecting another solid, but ordinary year ahead. The news about the novel coronavirus in China was very distant.

Market participants agreed the US could have imposed far harsher sanctions on Turkey this week, which helped to fuel a slight rally in local risk assets on Tuesday morning.

Romania will need to make progress towards fiscal consolidation once a new government is formed, according to rating agencies, as it is now dangerously close to slipping into speculative grade territory.

Ukraine, which has proven itself a favourite of emerging market investors this year, has slipped into international markets for a small dollar tap before year-end. The trade comes amid strained negotiations between Ukraine and the IMF over the disbursement of emergency funding.

With returns on developed market bonds being squeezed as never before, debt analysts are heralding emerging markets as the place for investors to be in 2021. Yet the faster the global economic recovery, the more vulnerable EM fixed income will be to what has often been its downfall: any signal of tighter global liquidity conditions, write Mariam Meskin and Oliver West.

Southeastern Europe's Montenegro sold a euro bond on Wednesday which bankers say, especially because of its timing, is simply another sign of emerging market issuers being enticed by the strong credit conditions on offer.

Emerging market bond mandates are continuing into the last month of the year, despite expectations that activity would quieten down after a jam-packed year of issuance. Kuwait’s Burgan Bank and Montenegro are among some of the CEEMEA issuers seeking to take advantage of unfalteringly attractive credit conditions.

Despite the market volatility and uncertainty that have gripped emerging market bond markets in 2020, green and ESG-linked issuance has continued to grow, and market participants expect further expansion next year.