Central and Eastern Europe (CEE)

Belfius cancelled a consent solicitation for one of its tier two bonds this week after the Single Resolution Board took the market by surprise and broadened the scope of its grandfathering period for ‘Brexit bonds’.

As emerging market IPOs continue to draw investors into countries many have never invested before, Turkey remains an obvious absentee. The country could be an EM equity giant but political decisions by its government continue to hinder Turkish businesses.

The shock sacking of Turkey’s third central bank governor in two years confirms to investors that the country lives in a world of its own — one in which central bank independence and fiscal prudence come second to the ideologies of the leader.

A handful of bond mandates from the CEEMEA region this week suggests that issuer confidence may be on the rise across emerging markets after a particularly turbulent period of sell-offs in US Treasury bonds.

An imminent bond issue from Turkey is looking unlikely, investors say, after the abrupt sacking on Saturday of Naci Ağbal, governor of the central bank, just a day after he had raised interest rates by 200bp. Both hard and local currency bonds have sold off and market participants fear a balance of payments crisis.

A wave of central bank rate hikes across emerging markets over the last week, particularly in CEEMEA, has stimulated investor confidence amid a volatile period in global markets. The recent rise in US Treasury yields had threatened to pull money away from EM, with a further risk of weakening local currencies.

Bond markets have been settling in for a period of higher US Treasury yields since Wednesday when the Federal Reserve confirmed it did not expect to raise rates before 2024. While that made long-dated issuance trickier for SSA issuers, there was hope that emerging market bond issuance will soon resume, even if a bumpy ride lies in wait. Mariam Meskin, Oliver West and Lewis McLellan report.

Všeobecná úverova banka (VÚB) issued a €500m five year covered bond on Wednesday at the tightest spread for any issuer from Slovakia.

Russian Railways ventured into the Swiss franc market this week to sell the first hybrid corporate bond in over two years, a sign of a maturing Swissie market, according to local market participants.

The Central Bank of the Republic of Turkey has brought relief to emerging market investors by exceeding market participants’ expectations and delivering a 200bp rate hike.

Despite the disruption that the coronavirus pandemic and, more recently, volatility in global markets have brought to emerging market debt, issuers in the CEEMEA region are not backing away from their pivot towards ESG financing. Though concerns about greenwashing are holding the market back, new sustainability-linked and transition structures are tempting issuers.

Russian hypermarket and grocery store chain Lenta is considering a share sale to boost the freefloat of its stock and raise capital to finance acquisitions.