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. Last Updated: 07/27/2016

Municipal Bonds Auctioned

ALMATY, Kazakhstan -- Kazakhstan's oil-rich Mangistau region has successfully placed the country's first municipal bond issue with an average yield of 14.71 percent, the Kazakhstan Stock Exchange said Thursday.

The region, on the Caspian Sea in western Kazakhstan, placed the entire volume of bonds worth 400 million tenge ($3 million) Wednesday but had to wait for the Finance Ministry to recognize the results of the auction.

The issue came almost a month after the ministry forced the region to withdraw the first bond tranche, which had been placed to yield 15.4 percent.

The ministry had said at the time it would not recognize yields over 14 percent, a position that market players interpreted as inspired by a fear that high yields could lure investors away from Kazakh sovereign Eurobonds.

The Finance Ministry earlier this week advised the region to hold yields to a maximum of 3 percent over Kazakhstan's sovereign paper.

However, investors have said they would not accept municipal bond yields below 14 percent.

Kazakhstan's 1999 Eurobond currently yields 10.48 percent, while 2002 bond yields 10.49 percent.

The Finance Ministry was not immediately available for comment.

The Mangistau bonds represent discounted zero-coupon securities with a nominal value of $100 and a 12-month maturity. They are denominated in dollars but will be redeemed in tenge at prevailing exchange rates.

At Wednesday's auction, demand outstripped supply by 10 percent, indicating domestic investors' hunger for new paper. Pension funds, seeking investment outlets in Kazakhstan's new markets, were among bidders.