Appetite exists for African sovereign bonds: PIMCO

Wed Feb 10, 2010 5:12pm GMT

By Phumza Macanda

JOHANNESBURG (Reuters) - African countries planning to tap international markets for funds will find the market receptive but the debt may come at a premium, partly due to the recent Dubai and European debt crises, the world's biggest bond fund said on Wednesday.

Michael Gomez, portfolio manager and co-head of emerging markets at PIMCO, said there is demand for African sovereign debt, even in the secondary market, with some spreads at their tightest in 18 months.

Many African countries postponed planned Eurobonds last year due to the global financial crisis and Gomez said investors are ready for new issuance this year to diversify their holdings.

"There are indications Angola is looking at the market, and Kenya. My sense is that there will be appetite for those types of names," Gomez told Reuters by telephone from London.

PIMCO has significant exposure in South Africa, Tunisia, Egypt and Gabon with limited holdings in Nigeria, Ghana and Ivory Coast.

"The emerging market external asset class has become bifurcated. Roughly two-thirds of countries have very strong credit quality and they trade very tight in spreads because of that perception, which is warranted."

"Another third is very high-yielding ... with much lower credit quality. There is a little bit of a void in the middle of that continuum ... there are some opportunities for African countries to tap into that," he said.


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