Roses and thorns among Africa’s local currency bond investments
Dovish central banks and restrained inflation make Nigeria and Ghana good contenders
In the last few months much has been written about the overwhelming demand experienced by African eurobond issuers. Nigeria, Kenya, Egypt and more recently Ivory Coast have all come out smiling, having issued bonds at low rates that were unimaginable just a few years back. While "kudos" might be the appropriate response to these issuers’ conquests in foreign lands, it’s important to keep an eye out for potential local opportunities. Unlike their attention-seeking spoilt cousins (eurobonds), local currency bonds have been steadily gaining traction given the general improvements in the global economy and, more importantly, the commodity price-linked cyclical economic recovery. Synchronised global growth and a rebound in commodities have spurred risk-on sentiment, allowing investors to give local currency bonds a second look in the search for yield. While positive sentiment is always useful, it is important to note that it is notoriously fickle, hence the need for macroeconomic policie...
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