In January 2021, IMF updated its World Economic Outlook and Global Financial Stability Report. The IMF team has revised upwards global economic growth in 2021 by 0.3ppts to 5.5%, noting that the strength of the recovery will vary significantly across countries. This revision reflects vaccination rollout and additional policy support from some large economies. The IMF expects 3.0% growth in Russia in 2021, up 0.2ppts from October forecast. In their Financial Stability Report, IMF noted that earlier-than-anticipated appearance of multiple vaccines helped risk sentiments and pushed equity markets further. However, the risks of market correction still persist, if investors reassess growth prospects or the policy support.
Emerging markets (EM) started the year strongly, with US$ 53.5bn portfolio inflows, of which US$ 9.4bn went into equity markets, while the rest in debt instruments, according to Institute of International Finance. IMF also stressed large financing needs of EMs in 2021, with Turkey and Ukraine in need of external financing ranging between 25-30% of the GDP.
In January 2021, regional sovereign Eurobonds traded mixed. Yields on UKRAINE 21 widened by 56pbs to 2.4% with the spreads over RUS 23 and GEORGIA 21 reaching 153bps and 125bps, respectively (up from 83ps and 100bps from end-2020). Yield on GEORGIA 21 reached 1.2% by end January, up from 0.8% as of Dec-2020 (likely related to lack of liquidity and upcoming maturity). Yields on UZBEK 24 and BELARUS 23 slightly widened (+20-30bps) in January, while other sovereigns from the region performed relatively well in January.
In January 2021, Armenia tapped the international debt markets, pricing its 3rd sovereign Eurobond – a US$ 750mn, 3.6% coupon, 10-year maturity instrument. Notably, due to strong investor interest initial size of the bond was increased from US$ 500mn to US$ 750mn.
Among Georgian corporate placements, GRAIL 22 was the best performer, with the yield down by 90bps, while the spreads over comparable railway companies narrowed, with the spread over RUS RAIL 22 down from 280bps in end-2020 to 175bps by end January 21. Other corporate Eurobonds also performed strongly, with the yields on Silknet, CGEOLN (GGU) and GEOCAP down by 30-44bps. Georgian banks traded mixed in January, with the yield on TBC 24 down by 42bps, while BoG 23 widening slightly, by 10bps in the same period.
Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, Ukraine, Russia, Turkey, Uzbekistan.
