Fixed Income Pulse: CEE, CIS and Russia – A busy time for the region
Emerging Europe and Central Asian issuers have been active in 2020, as we’ve seen a flurry of first-time issuers and local currency bonds from the region come to our markets.
Hungary was one of the first sovereigns from the region to list its bonds in London this year, raising €2 billion at the end of April, shortly followed by its debut green bond in June 2020 on London Stock Exchange’s Sustainable Bond Market, a €1.5 billion 15-year note. The Hungarian green Eurobond was well received by the market with orderbooks exceeding €7 billion. The proceeds from the issue will be used to finance various environmentally friendly investments funded by the central budget.
London’s Sustainable Bond Market (SBM) has continued evolving since its launch at the end of 2019. 2020 has seen the addition of the Sustainability Linked bonds segment as well as the launch of the SBM Advisory Group, a forum for market participants to provide input on London Stock Exchange’s SMB and act as a consultative body on future developments in the sustainable field. London Stock Exchange also participated in an industry working group on Climate Transition Finance, helping define the global transition finance handbook. This will enable an even broader array of innovative products to join our international markets.
In June, MFB, the Hungarian Development Bank issued its €750 million euro-denominated bond on London’s Main Market with an annual coupon of 1.375% and a maturity of 5 years. The bank’s core activities include the provision of preferential loans for domestic businesses and private individuals, the fulfilment of development requirements and fund management tasks in relation to the country’s European Union membership.
Taking advantage of favourable market conditions, Hungary returned to the market for a third time in November, raising €2.5 billion through a dual tranche bond. The Republic of Serbia followed shortly after and issued a 10-year $1.2 billion note early December, after raising €2 billion in May.
At the end of November, the Republic of Uzbekistan issued a dual currency dual tranche bond: a $555 million 10-year tranche plus its debut Samarkand bond, a 3-year local currency tranche raising UZS 2 trillion. Only a couple of days after, the International Finance Corporation came to our markets with an additional Samarkand bond, raising UZS 363 billion through a short-term note.
“Samarkand” bonds, the name by which Uzbek Soum denominated bonds are referred, are issued with the aim to expand the investor base in Uzbek Soum and raise the profile of the currency in the international debt markets. Through reform momentum, fast pace demographic transition and a stable fiscal policy, Uzbekistan aims to build an offshore local currency bond market, providing diversification in the investor base for Uzbek debt issuers.
London’s local currency bond markets continue to grow, with active bonds listed in more than 50 different currencies from more than 80 countries, a clear reflection of the depth and breadth of London’s international issuer base.
In December, the State of Montenegro closed the year for sovereigns in the region, raising a 7-year €750 million bond at 2.875%, with demand for the bond reaching almost €3 billion.
Corporates and banks from the region have also taken advantage of the conductive market conditions and investor appetite to tap the market.
The Development Bank of Kazakhstan listed its bonds on London’s markets pre-pandemic, with a KZT 62.5 billion 5-year bond in February. In October we saw Kazakhstan issuers back on our markets with a $750 million note from Kazmunaygas, due in 2033.
The state-owned National Bank for Foreign Economic Activity of the Republic of Uzbekistan, the largest bank in Uzbekistan based on assets, issued its debut US$300 million 5-year Regulation S senior unsecured notes on London Stock Exchange’s Main Market in October.
Just a month later, Ipoteka Bank, Uzbekistan’s largest mortgage lender, successfully accessed the international capital markets for the first time by issuing a $300 million 5-year Eurobond at a coupon of 5.5%.
Finally, Russia came out with a landmark transaction through the internet company Mail.Ru, accessing the international bond market for the first time with a 5-year $400 million at a 1.625% coupon that was listed on our Main Market in mid-November. Of note is that the secondary market for Russian GDRs has also been active; 6 of the top 10 securities traded in November on London Stock Exchange's International Order Book were Russian. Russian securities reached $5.4 billion in value traded in November and $60.7 billion in value traded for the year to date (through November).