The Markets

NAIROBI (Capital Markets in Africa) – Kenya should issue local-currency debt outside the country to check depreciation of the shilling, rather than managing the unit, its Capital Markets Authority said. The International Monetary Fund reclassified the shilling from “floating” to “other managed arrangement” in October to reflect the currency’s limited movement due to periodic central bank interventions, saying the unit was overvalued by about 17.5 percent. “There are opportunities for Kenya to consider adopting alternative…

TUNIS (Capital Markets in Africa) – Citi Research indicated that the Tunisian dinar (TND) has been under pressure since early 2018, as the exchange rate depreciated by 20% in 2018. It attributed the weakening of the dinar to the sustained fiscal and current account deficits, as well as to the very limited progress in economic reforms, even though the country has a financial agreement with the International Monetary Fund that is linked to achieving pre-set…

LONDON (Capital Markets in Africa) – Trade Secretary Liam Fox said he’s confident the U.K. can agree a divorce deal with the European Union by the end of next month because the continent’s faltering economies will force the bloc to come to an “accommodation.” Citing Italy entering recession and weakness in the German and French economies, he said the EU 27 should be pushing for a deal.  “This is not a good time to introduce further unnecessary instability into…

NAIROBI (Capital Markets in Africa) – Benchmark South African bond yields dropped to eight-month lows in the wake of the Federal Reserve’s more dovish stance — and there may be more to come, with inflation expectations plummeting and investors pricing out any chance of a rate hike in the next two years. Yields on government securities due 2026 fell 16 basis points on Thursday to the lowest since June 1 on a closing basis. South African local-currency bonds have…

LAGOS (Capital Markets in Africa) – The rising-dollar trend that inflicted so much damage on risk appetite in 2018 is all but a thing of the past, according to Amundi Asset Management. And that can only be good for emerging markets. “The two macro threats — basically the dollar and higher interest rates coming from the U.S. — are basically diminished and they are behind us,” Pascal Blanque, group chief investment officer for Amundi, said in…

CAIRO (Capital Markets in Africa) – Egypt approached JPMorgan Chase & Co.’s to be included inclusion in its emerging-market bond indexes and is making progress on a plan to make it easier for foreigners to invest in its local debt, Finance minister Mohamed Maait said. “Our strategy aims to reduce our borrowing costs and make our debt more attractive,” Maait said in a telephone interview on Thursday. Joining the JPMorgan indexes would “have a positive impact as…

LAGOS (Capital Markets in Africa) — Corporate credit metrics diverge across Eastern Europe, the Middle East and Africa (EMEA), as sector spreads are tightly correlated to sovereign risk. Fundamentals continue to improve for the region’s energy sector issuers, while EMEA banks remain subject to idiosyncratic, country-specific risk.  EMEA energy sector debt valuations are driven by country rather than company fundamentals, resulting in higher yields than emerging market peers. Energy sector issuers from Central Asia and…