In January the Republic of Argentina launched a $2 billion 20-year global bond. It was almost four times oversubscribed, priced below the indicated spread range and still tightened 40 basis points in the first two days' trading. The Argentina/Mexico spread differential at 20 years fell from 120bp to 75bp.
As the issue was launched, bookrunner Merrill Lynch's head of fixed income Jim Quigley enthused: "We saw accounts in this that we have never seen in an emerging market instrument before. There were high-quality European pension funds, sophisticated financial institutions which usually buy only triple-A and double-A securities." Other syndicate members confirm that many accounts who normally balk at paper over seven years piled enthusiastically into the issue.
They needn't have panicked. There is plenty more high-yield sovereign paper coming to market. Uzbekistan plans a debut Eurobond; Brazil is to launch its longest-dated deal yet at 20 years; Lebanese issuers...
