What is expensive, which is expected in the case of Iraq the sale of sovereign bonds for investors?

What is expensive, which is expected in the case of Iraq the sale of sovereign bonds for investors?

09/17/2015 12:52

What is expensive - which is expected in the case of Iraq the sale of sovereign bonds for investorsHe warned a report by the Reuters news agency from the deterioration of the financial problems of Iraq in the long term .

BAGHDAD / obelisk warned a report by the Reuters news agency from the deterioration of the financial problems of Iraq in the long term, following the presentation of dollar-denominated sovereign bonds in the international bond market at high interest rates to cover the deficit in the budget because of the war against Daash.

Reuters said in its report, seen by “obelisk” Iraq seems to be on his way to a successful return to the international bond market after an absence of nine years to collect billions of dollars at high interest rates may lead to a deterioration of the financial problems in the long run.

Baghdad and organized a promotion to investors last week for a series of dollar-denominated sovereign bond issues, which hopes through which you can measure up to six billion dollars.

Iraq has been under financial pressure because of the war and to organize Daash tensions between the central government and the Kurdistan region in addition to the drop in oil prices.

When allocated Standard & Poor’s rating (B-) credit for Iraq this month, no fewer than six degrees of classification investment institution said that the risks related to security and institutions in Iraq among the highest level between all the countries that institution shall be classified and on a par with Egypt and never the two Greece.

It maximizes internal risk the instability of the global market environment and the trend is expected to begin to raise US interest rates may be starting this month.

And approached a return swaps in exchange for the commitment of Iraq to ensure the five-year used in the insurance of sovereign debt defaults from its highest level in almost six years if the risk rose 77 basis points to 576 basis points.

However, reducing the risk of potential oil industry unit in Iraq’s second-largest oil producer in OPEC.

Iraq has raised crude oil production to 3.8 million barrels per day in June from 3.05 million barrels per day a year earlier.

Baghdad has said it aimed to raise its production capacity to total between 8.5 million and nine million barrels a day by 2020.

Among the factors that work to slow down the increase in oil production, bureaucratic hurdles and security concerns and inadequate pipes and storage capacity lines.

But most of the southern fields where production has survived acts of violence Iraq is expected to be able to pay its debts with satisfaction if achieved at least a part of its oil plans.

Said Ram Mohan, director at Abu Dhabi Investment Authority, which holds the review of the bond issue prospectus before deciding on the decision to invest in this version, “Iraq now has foreign exchange reserves approaching $ 65 billion and certainly contribute to higher production in increased even further.”

So fund managers say that Iraq will not find buyers for its bonds only if you pay very high returns.

Baghdad has not announced the size of the first issuance or for the entitlement But bankers expect to be in the range of two billion dollars and have him from five to seven years.

The yield on the Iraqi jumped dollar bonds maturing in 2028 to all-time highs of up to 10.80 percent last week from 8.3 percent at the end of 2014 partly due to expectations of an increase of supply in the market.

He said Raza Agha sovereign bonds of emerging markets analyst at VTB Capital “in light of the Iraqi bonds that mature in 2028 exchange rates and the level of the standard price would have to be a coupon for a new version of Iraq for a decade 10.75 percent, consistent with the bond existing” In the market.

He added that the version in the pricing of those limits mean that Iraq will become the highest return bond issues between the oil-exporting countries in the Middle East and Africa.

Iraq and systems to promote meetings for investors in London on Thursday and Friday is due to this activity moves to New York, Boston and Los Angeles this week.

Focus on the Western financial centers and indicates that Iraq might be targeting large part sale of bonds to hedge funds and professional investors willing to accept the level of risk is high not to Gulf banks, which tend to buy high-yield bonds issued by the region.

Xuan said Taha Ibrahim, the founder of Spring Securities Company in Baghdad, said the bond issue came at the wrong time due to low oil prices and increased spending on Baghdad battles in the war on the organization of the Islamic state.

“It’s the first you turn a huge surplus into a huge deficit. But the impact of that on the spot is a trend to very conservative fiscal policy is not to borrow money.”

But if the release is part of a coordinated program to strengthen the financial position of Baghdad may be investors reacted positively. According to the prospectus that it might as well be as stating that Iraq will use a range of options such as domestic bonds and loans in addition to the Special Drawing Rights of the International Monetary Fund.

In early June, and the IMF agreed to lend Iraq $ 833 million is expected that the World Bank is providing $ 1.7 billion for Baghdad.

Taha said the positive is the first time that people are thinking about all that and thinking about what happened and how to correct economic path.

Some fund managers believe that the bonds issued by Iraq priced in a manner attractive pricing compared to Egypt bonds that mature in 2020 and classified as a higher degree of one of Iraq as that Egypt faces major political and security problems.

And those bonds are trading at a price of 4.68 percent.