Mauritius and Morocco join African bond index

The move by two of Africa's better rated issuers to join the ABABI index is expected to help drive investment into bond markets in Mauritius and Morocco.


Image : Issouf SANOGO /AFP

Mauritius and Morocco join eight African countries that are part of the Bloomberg African Bond Indices (ABABI) to provide investors with a tool to measure and track the performance of Africa’s local bond markets.

The set of indices, which are administered by the African Development Bank (AfDB), are calculated by the global index provider and media giant Bloomberg.

Indices are used as a benchmark against which the performance of a financial instrument can be tracked and to make comparisons within a region, industry sector or other asset class.

It is hoped that ABABI will help drive investment into bond markets in Mauritius and Morocco, which are two of Africa’s better rated issuers.

Morocco, Mauritius, Senegal and South Africa are the only African countries that are above the B rating of “speculative” and “subject to high credit risk”, given by the bond ratings agency Moody’s.

“This is a positive development as the inclusion of Mauritius and Morocco will improve the overall credit quality of the ABABI, which now captures close to 90% of the outstanding amount of African sovereign local currency bonds,” said Stefan Nalletamby, AfDB’s director of the Financial Sector Development Department.

He adds that sovereign debt managers will need to “further diversify their local currency funding instruments, adjust their strategies, enhance transparency and widen their fixed income investor base,” to attract capital.

African countries have come under pressure to develop their domestic debt markets to meet state and corporate borrowing needs.

Many rely on international markets where debt is issued in Euros and dollars and sovereigns are exposed to exchange rate risk.

Some countries like Tanzania remain wary of international investment in domestic markets and will not allow foreign investors to buy local bonds.

Other issues include the lack of a corporate participation, with governments accounting for around 75% of all debt issuance across local markets.

The ABABI was introduced in 2014 in partnership with the African Financial Markets Initiative (AFMI) to deepen debt markets across the continent.

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