“The country now has the trappings of a solid sovereign issuance programme with a yield curve and a debt management office, with all of this undertaken while it is in an IMF programme,” says Mr Grehan.
Others such as the Ivory Coast, Kenya and Senegal have been tapping the market for debt with a long maturity, in this case of 30 years. They have also added “further diversification” with debut issues denominated in euros.
As such it appears this market is opening up.
Tread carefully
But Mr Grehan reiterates an important point for investors: be careful about what you buy.
“Such a plethora of bonds compels investors to be selective,” he adds. “Not all issuers will be able to complete this process smoothly.
“You have to differentiate between the different frontier markets now, especially in terms of their capacity to refinance their existing issues, because in the early 2020s many of these countries will have to redeem their first Eurobonds.”
Government bonds are not the only game in town, with plenty of corporate debt to buy within these markets.
Investors have a plethora of sectors to choose from, as suggested by the composition of equity indices. Financials make up 44 per cent of the MSCI Frontier Markets benchmark, though telecoms, consumer staples and real estate also represent significant weightings.
But investors should remain selective.
They must also not forget that, like emerging market debt, bonds in frontier markets can be vulnerable to a rise in the value of the US dollar.
david.baxter@ft.com
