Wednesday, 14 August 2013

Sika-sem: Ghana pays above-and-beyond for its 10-year bonds………(mercy)....

Title: Ghana raises $750m, but pays a premium
Date: 25th July 2013

It’s a sign of the times. Ghana on Thursday raised $750m from the sale of 10-year eurobonds, but the deal did not come easy.

With investors more cautious about lending to frontier countries with shaky finances following June’s violent market rout, Ghana had to pay a premium to get the deal off the ground.

At 8 per cent, the yield that Ghana is paying to borrow is at a level that has not been seen in the EM hard currency bond market for a while now.

It is sharply higher than the 6.625 per cent Nigeria paid for its 10-year bonds earlier this month. At the height of the EM bond buying frenzy in April, Rwanda, the central African state is best-known for a civil war and genocide in 1994, paid only 6.875 per cent for its maiden $400m 10-year issue.

As one investor told Reuters, Ghana would have probably paid around 5 per cent had it issued the Eurobond prior to June 19. That was the day Ben Bernanke said the US Federal Reserve could soon start scaling back its massive quantitative easing programme – comments that prompted a wholesale sell-off in EM assets.

Investors’ cautiousness post rout was plain to see in the Ghana issue. While Rwanda’s $400m issue received more than $3bn in orders, demand for Ghana’s papers was decidedly more subdued.
As the WSJ reported:
Ghana’s sale of $750 million in 10-year bonds attracted orders of over $2 billion, a response that’s less enthusiastic than other African countries have seen in recent months…
…The muted reaction is a sobering reminder to emerging-market countries that foreign inflows can abate as quickly as they arrived.

Paulina says: I feel sooooooooooooooo sad reading the above piece. Are we in trouble financially, because I keep hearing the rumours..... why the urgent need to keep borrowing or buying money? it appears some people/bodies are thinking about themselves and have no regard for the future or Ghana's future generations. I really we have anything left in the kitty???

Anyway I'm a good girl soo I'm not going to say what I really think is going on...but I hoping the 'big brothersssssssss' of Ghana leave some money in the coffers for future generation, because I get the feeling that the next government --never mind future businesses --wouldn't be able to borrow money again and then what will we do about progress? What of Ghana's progress then????

We all know that stealing is an epidemic sickness in all of Africa and beyond, but why not put some money into schools, hospitals, roads, tourism et al first ----then eat the rest -because they are going to eat it anyway!!!! I don't know are we broke?

Anyway.....the following comments accompany the above text and have added to my sorrow with regards to our sika issues in Ghana... please note -the above piece was only written last month...

"Bernanke is largely irrelevant here. Worth around 50bp at best. Ghana's willingness to pay 8% tells us more about its current cash and reserves shortfalls. Seth Terkper and his team should have showed a firmer grip on taming the budget hole before re-clambering aboard the eurobond train. Watch the Cedi head for 2.10 and the Bank of Ghana scramble next week to try and offset a looming inflationary mess." M

"Ghana's fiscal woes didn't help at all. But make no mistake, neither did Bernanke's comments. They were anything but irrelevant. Ghana's 2017 Eurobond, the only one it had outstanding before this latest deal, widened 200bp between late May (when Bernanke first hinted QE might be slowed) and mid-June. That's huge." R 

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