Morocco Eyes Lowest Borrowing Cost in Return to Euro Market

RABAT (Capital Markers in Africa) – Morocco is targeting its lowest euro-borrowing costs ever as it returns to international debt markets for the first time in five years, taking advantage of robust investor demand for securities denominated in euro.

The north African nation is marketing 12-year euro-denominated bonds with a yield in the 1.8% area, according to a person familiar with the transaction who asked not to be identified because they are not authorized to speak about it. It paid a coupon of 3.5% when it last sold 10-year euro bonds in June 2014.

The government said in October it planned to raise either $1 billion or 1 billion euros ($1.1 billion). A global interest-rate easing cycle would give Morocco “a window of opportunity in November,” Finance Minister Mohamed Benchaabounsaid at the time. The country’s foreign debt is rated Ba1 at Moody’s Investors Service, one level below investment grade. S&P Global Ratings and Fitch Ratings assess the debt one level higher.

Egypt, Ivory Coast, Tunisia, and Benin have tapped the single currency this year to benefit from lower borrowing costs relative to dollars. Egypt’s 2 billion euro deal in August attracted almost 9 billion euros of bids. A sovereign bond denominated in euros eliminates currency-hedging costs for European investors, making it particularly attractive, according to Lutz Roehmeyer at Capitulum Asset Management in Berlin.

“We will buy it for sure,” said Roehmeyer, who helps manage about 700 million euros, referring to Morocco’s deal. The country doesn’t have a big presence in international markets, “so scarcity dictates the yield,” he said.

Yields on Morocco’s 2024 euro bonds have dropped 130 basis points in the past year to 0.55% as low-to-negative rates in developed nations in Europe fueled demand for higher-paying assets.

Barclays Plc, BNP Paribas SA, JPMorgan Chase & Co., and Natixis SA are managing Morocco’s transaction.

Source: Bloomberg Business News