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. Last Updated: 07/27/2016

Kazakh Bond Fetches $200M In Sign of Rising Confidence

ALMATY, Kazakhstan -- A five-year, $350 million Eurobond issued Tuesday by Kazakhstan was quickly snapped up as investor confidence grows in the former Soviet republic's market economic reforms, bankers said.

Lead manager J.P. Morgan said the bond would be priced to yield 245 basis points over a five-year U.S. Treasury note.

Last year, Kazakhstan launched its debut three-year Eurobond worth $200 million. The Eurobond was placed with a spread of 350 basis points over comparable U.S. Treasury notes.

Both Kazakh officials and Western investors said the lower initial spread this year reflected improvements in the Kazakh economy.

"We feel that this spread is going to tighten in the next couple of months," said Noman Siddiqi, head of the structural finance department at ABN Amro Bank Kazakhstan.

Siddiqi said last year's Eurobond, due to mature in December 1999, was currently traded with a spread of 178 basis points, much below its initial spread of 350 points.

"This in itself shows the demand for Kazakh paper," he said.

Bankers in London said the bond had been oversubscribed, with investors fighting to get the scarce Kazakh paper.

Abulgazin pointed at financial stability achieved in Kazakhstan, a resource-rich country of arid steppe five times the size of France.

Low inflation and the stable tenge saw yields plummet on Kazakh Treasury bills, which have more than halved since January to 12 percent to 15 percent annual depending on maturity.

"T-bill yields will soon fall further to 10 percent. ... This will open a real investment period," Prime Minister Akezhan Kazhegeldin told a recent news conference.

Officials said Eurobond issue proceeds will help finance Kazakhstan's 1998 budget gap of 110.6 billion tenge ($1.46 billion), or 5.5 percent of GDP.