BELARUS NEWS AND ANALYSIS
DATE:
23/03/2011
Belarus Bond Yields Soar to Record on Devaluation Concern
By Jack Jordan and Denis Maternovsky
March 23 (Bloomberg) -- Belarus’s dollar bonds plunged, lifting yields by record amounts to new highs, on concern the former Soviet republic may be forced to devalue its ruble and will struggle to repay its debt.
Yields on the country’s $1 billion of 2015 notes issued in July climbed 183 basis points, or 1.83 percentage points, to 12.449 percent as of 6:15 p.m. in London. Debt of $800 million maturing in 2018 sold in January fell 5.4 percent to 85.10 cents on the dollar, pushing the yield up 114 basis points to 12.22 percent. Belarus’s ruble lost 0.2 percent to 3,025 per dollar.
The market “has been gripped with fears of a possible devaluation and even a sovereign default,” Ivan Tchakarov, chief economist for Russia and the former Soviet Union at Bank of America Merrill Lynch in Moscow, wrote in an e-mailed research report. “Fears have been fuelled by declining foreign reserves as Belarus struggles to contain a widening current- account deficit.”
In reserves as Belarus struggles to contain a widening current- account deficit.”
The country’s foreign reserves were at $2.9 billion in December, down 33 percent from a year earlier, while its current-account deficit was 15.6 percent of GDP last year, according to data compiled by Bloomberg. In comparison, Greece’s current-account deficit reached 15.3 percent of GDP in the third quarter of 2008, and began 2010 at 12.2 percent before the country had to turn to the European Union for a rescue loan.
Belarus asked Russia and its other former Soviet partners for loans totaling $3 billion, Russian Finance Minister Alexei Kudrin said on March 15.
‘Large Refinancing’
“The market has suddenly become aware of Belarus’s large refinancing requirements in 2011,” Anton Hauser, who helps manage about 1.4 billion euros ($2 billion) at Erste Sparinvest in Vienna and holds Belarus’s 2015 dollar notes, said by e-mail today. Erste won’t sell its holdings of these bonds “as we bet that Russia will increase their strategic leverage over them by providing a loan,” he said.
Belarus is likely to devalue its ruble as it runs out of foreign reserves because of an “intolerable” current-account deficit, Danske Bank A/S wrote in a March 21 report.
The Natsionalnyi Bank Respubliki Belarus, the central bank, said on March 15 that it has no plans for a “sharp” currency devaluation. The Belarusian ruble will be allowed to fluctuate within 8 percent of 1,057.04 rubles, the value of its target basket at the start of the year, the bank said March 15. The basket is divided equally into dollars, euros and Russian rubles.
The central bank devalued its currency by about a fifth in January 2009.
--Editors: John Kohut, Alex Nicholson, Gavin Serkin.
To contact the reporters on this story: Jack Jordan in London at jjordan22@bloomberg.net; Denis Maternovsky at dmaternovsky@bloomberg.net.
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net.
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