Ivory Coast Bonds Rise as Fitch Upgrade Hands It Near IG Status in Africa
TL;DR
Ivory Coast's bonds rose after Fitch upgraded its debt rating to BB, placing it two levels below investment grade and above South Africa. The upgrade reflects financial improvements since 2022, with bonds hitting highs and recent debt issuance oversubscribed. However, capital inflows are expected to be gradual rather than a surge.
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Ivory Coast’s dollar-denominated bonds rose after Fitch Ratings Inc. upgraded the country’s debt, leaving it now just two levels below investment grade at all three major rating companies.
Fitch upgraded the country’s long-term foreign-currency debt rating by one step from BB- to BB, the same level as S&P Global Ratings and Moody’s Ratings.
The rating from the three leaves Ivory Coast ranked higher than South Africa, the continent’s largest economy, according to Carmen Altenkirch, emerging market sovereign analyst at Aviva Investors Global Services Ltd. South Africa is still rated BB- by Fitch.
“This marks a remarkable transformation for a country that defaulted on its debt less than 15 years ago,” she said.
The nation’s bonds maturing in 2037 rose 0.43 cents on the dollar to trade at 106.17 cents as of 2:01 p.m. in London on Monday, according to CBBT composite pricing, their highest since Oct. 31.
The Fitch upgrade reflects the steady improvement in the nation’s finances since the 2022 cocoa shock, according to Kaan Nazli, portfolio manager and senior economist at Neuberger Berman Europe Limited.
Read More: Ivory Coast Bonds Gain as Ouattara Poll Win Assures Investors
In January, Ivory Coast, the world’s biggest cocoa producer, sold debt on international markets for the first time in seven years. The debt issuance, among the first from the continent this year, for $2.6 billion was oversubscribed by more than three times. Ivory Coast President Alassane Ouattara won a fourth term in October and has presided over one of the continent’s fastest growing economies since coming to power in 2011.
The current favorable investor sentiment toward Ivory Coast however won’t result in “a wholesale shift of capital” out of regional peer Senegal, added Nazli. Senegal’s debt woes have sent its bonds to trade at distressed levels and is among the worst performers in emerging markets this year, according to data tracked by Bloomberg.
While many investors hold a consensus overweight view on Ivory Coast, there is a limited wall of money available to lead to an immediate surge in inflows, according to Leo Morawiecki, an emerging markets analyst at Abrdn Investments Ltd.
“Its more of a slow grind tighter as over the past few years all metrics continues to improve; debt levels, fiscals, balance of payments,” he said. “Predictable — and more of a carry story — is the rationale here.”
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