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Ivory Coast Eurobonds Drop, Extending Record Yields, Over Default Concern

24 December 2010 00:45 (UTC +04:00)

Baku-APA. Ivory Coastâ€™s Eurobonds fell for a sixth day, extending record-high yields, as uncertainty grew over whether the worldâ€™s biggest cocoa producer would service its debt during a violent power struggle following an election, APA reports quoting bloomberg.com website.
Ivory Coast has been embroiled in a political stand-off between Laurent Gbagbo, the president of a decade, and Alassane Ouattara, the United Nations-backed winner of the Nov. 28 election. In a week of political violence as Gbagbo refuses to accept defeat, 173 people died, the UN said today.
West African ministers today discussed whether to cut Laurent Gbagboâ€™s access to foreign reserves held at the Central Bank of West African States, or BCEAO, a move which could push him to use existing funds to pay the army and civil servants as he clings on to power, triggering concern that the country may default on a $29 million interest payment due Dec. 31.
â€œIf Ivory Coast defaults on its Eurobond interest payments, index investors will start selling,â€ Phillip Blackwood, head of emerging markets at Sydbank A/S, Denmarkâ€™s fourth-largest bank, said in an interview from Aarhus today, referring to JPMorgan Chase & Co.â€™s EMBI+ Index, which gauges the extra yield investors demand to hold emerging-market debt over U.S. Treasuries. â€œKnowing this, other non-index investors anticipating the move will do so beforehand.â€ Blackwood manages $2.7 billion in funds.
The 2.5 percent dollar-denominated bonds retreated as investors bid 42.5 cents on the dollar for the notes due December 2032, down from a close of 44.88 yesterday, as of 1:31 p.m. in Abidjan, the commercial capital, according to data compiled by Bloomberg. The decline to the lowest since the bonds were issued drove the yield to a record 15.038 percent from a close of 14.301 percent yesterday.
The BCEAO is reviewing a request by Ouattara to give him signing powers over Ivory Coastâ€™s account at the bank. Ivory Coast is part of the West African Monetary Union, which is managed by the BCEAO.
Ivory Coast has a 30-day grace period to make its interest payment.