Development Bank of Kazakhstan raises KZT 100 billion at 15.60 per cent

Development Bank of Kazakhstan raised KZT 100 billion on 12 November by selling seven-year bonds at a 15.60 per cent coupon, the Kazakhstan Stock Exchange reported, after nine participants bid KZT 125.9 billion for the issue.

Demand covered the offer 1.26 times. The exchange counted 31 orders, 22 of them still active when the book closed, with active bids for the coupon ranging from 15.49 to 15.70 per cent and averaging 15.61 per cent. Twenty orders were filled at the single rate. Institutional investors other than banks and brokers bought 72.8 per cent of the bonds, other companies 21.2 per cent and banks 5.0 per cent; individuals took less than 0.1 per cent. The bonds pay an annual coupon and mature on 12 November 2033.

The coupon is a shade under the National Bank's base rate of 15.75 per cent, set when it cut the rate for a fourth time on 23 October. It is well above the sovereign's own long-term cost. Two days earlier the finance ministry sold KZT 50.4 billion of MEUKAM bonds with 9.8 years left to run at a yield of 13.70 per cent, and a 12.1-year line cleared at the same 13.70 per cent.

Short money costs more than long. On 9 November the National Bank placed 500 million short-term notes for KZT 48.1 billion at a weighted yield of 15.72 per cent, in a hybrid auction that sold 100 million of the notes in tokenised form alongside 400 million traditional ones. Kazakhstan Sustainability Fund raised KZT 9.6 billion on 12 November with two-year bonds at a 15.02 per cent yield to maturity, from a single order.

Read together, the week's deals put the state development bank about 190 basis points over the yield on the sovereign's 9.8-year bond, and close to the rate on the National Bank's own short paper. That is the gap between the bank's coupon and the ministry's 9.8-year yield.

Supply from state issuers has been heavy. The finance ministry sold KZT 432 billion of bonds at four auctions in October, and Kazakhstan Housing Company placed KZT 75 billion at 16.22 per cent the same month.