Chasing higher yields, investors pile into risky countries

WHERE can you find a 7% interest rate on a sovereign dollar-bond? You would have to take a time-machine to the mid-1990s to find such a yield on a ten-year American Treasury. Alternatively, you could slip back a few days to August 2nd and bid for the $1bn of five-year bonds sold by the government of Iraq. The yield was expected to be 7%, but it was trimmed to 6.75% once orders rose above $6bn.

Such eagerness for hard-currency debt from a country still reeling from a civil war shows just how far bond investors will now go to get a decent yield. Oversubscribed issues for risky sovereign bonds have become almost normal. The Iraqi sale came just a week after Greece (whose privately held debt was partly written off in 2012) raised €3bn ($3.5bn) in its first bond sale for three years. In June Argentina was inundated with bids for its 100-year eurobond, as dollar-denominated bonds are known. Sceptics noted that Argentina had defaulted on its debts six times in the previous century, with the most…Continue reading

This post was originally published in the Economist.

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Chasing higher yields, investors pile into risky countries

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