Globalization has come with an increasingly interconnected system of capital markets.
This has made way for government bonds denominated in foreign currencies.
And those bonds have come with memorable nicknames.
Korea offers “kimchi” bonds. Turkey offers “baklava” bonds. Japan offers “samurai” bonds. And Australia offers “kangaroo” bonds.
One new foreign bond offering is attracting tons of attention for its bonds’ nickname.
Because, people are calling Armenia’s new dollar-denominated bonds “Kardashian” bonds.
And bond investors can thank Standard Bank’s Tim Ash who coined it in a note to clients earlier this month.
“Jim O’Neill gave the world BRICS, I can retire now having given the world the Kardashian “bottom” bond,” said Ash according to the Wall Street Journal’s Katie Martin. Martin has a post about it on WSJ.com.
“Public finances are a lot stronger in Armenia than Serbia, but par with Georgia,” Ash said today. “Political stability – stronger in Armenia these days than either Georgia or Serbia. Net-net, Armenia probably should price wide to Georgia (new issue premium/ lack of market support/knowledge) but inside Serbia.”
But what might’ve began as a joke nickname may actually have some significant parallels
“[A]t present I would price these guys to yield around the 6.5-6.6% level for a 10Y,” added Ash. “Interestingly, much might be made of the “Kardashian” angle, i.e. a strong Western diaspora in the US/France which might support such a new issue.”
The emerging markets have spent much of the year in turmoil. But surprisingly, frontier markets like Armenia have been remarkably resilient.
“Frontier Market funds ($1.5bn inflows YTD) have decoupled from Emerging Markets ($2.1bn outflows YTD),” noted Bank of America Merrill Lynch’s Michael Hartnett in a note to clients last month.
“These so-called “emerging markets of the future” have enjoyed strong growth from low base effects, abundant natural and human resources, the availability of easy gains from market reforms and injections of technology into relatively low-wage economies,” said Franklin Templeton’s Mark Mobius in June. “Compared with more mature emerging markets, frontier markets are relatively under-researched, and we believe that this lack of familiarity could lead to undervaluation and pricing anomalies that we could seek to exploit through our extensive research resources.”
With interest rates low and money flowing into the frontier markets, these new “Kardashian” bonds might be the sexiest new bonds in the market.
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