Azerbaijan selling $1.25b debut bonds amid Fed cuts

Azerbaijan, an oil-rich former Soviet republic, is selling its first international bond as cuts in U.S. stimulus and turmoil in some emerging markets threaten demand for riskier assets.

Azerbaijan is offering $1.25 billion of 10-year securities at a yield of 5 percent, according to a person familiar with the deal, who asked not to be identified because the information is private. The average yield for emerging-market debt rose nine basis points last week to 5.11 percent on March 7, according to the Bloomberg USD Emerging Market Sovereign Bond Index.

“Azerbaijan still offers good value at 5 percent,” Alexander Moseley, a senior portfolio manager at Schroders Plc, which oversees $87 billion in fixed-income assets globally, said by e-mail, adding that he participated in Azerbaijan’s new issue. “It’s hard to find good investment-grade 10-year bonds with that spread.”

The yield on developing-nation dollar bonds has climbed this month as Russia tightened its grip on Ukraine’s Crimea region amid threats of international sanctions. The Federal Reserve’s scaling back of bond purchases and signs of a slowdown in China have also damped appetite for emerging-market assets.

Azerbaijan is rated BBB-, the lowest investment grade and one step below Brazil and Russia, by Standard & Poor’s and Fitch Ratings. Proceeds from the sale will be used for general budgetary purposes, according to a preliminary prospectus obtained by Bloomberg News. Mais Piriyev, head of the Finance Ministry’s press service, declined to comment when contacted by phone yesterday.

(Bloomberg)

ANN.Az