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World Bank warns Africa bond bonanza risks hurting nations

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African sovereigns such as Ghana and Benin joined a slew of high-yielding borrowers this year who took advantage of the dovish turn by the Federal Reserve and some of the world’s most important central banks to sell bonds.

Thursday 18, April 2019

(Bloomberg) --The World Bank warned that high demand for African eurobonds will place countries at a higher risk of debt distress once an increase in US rates prompts investors to turn their backs on emerging-market assets.

The premium investors receive to own African nations’ dollar bonds rather than US Treasuries was at 450 basis points last week, according to JPMorgan Chase indexes.

Kristalina Georgieva, World Bank’s Chief Executive Officer, said, “We are very concerned, the situation can become very difficult.”

There are 17 African countries that are in high debt or high distress, those in the worst situations include Chad, Republic of Congo as well as Gambia, Mozambique, South Sudan and Zimbabwe, said Georgieva.

“We have lived through a long period of low interest rates and low yields and that has made African countries very attractive destination for those seeking higher yield,” Georgieva said. “

By mid-March, emerging-market borrowers had raised almost $400 billion in foreign bonds so far in 2019, a record on a year-to-date basis.

 

TAGS : JPMorgan Chase indexes, African eurobonds, World Bank, US rates

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