Sovereign Bonds Fly High On Low Rates

With a possible Fed rate hike looming, sovereign bonds are having a field day.

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As sovereign issuers tried to lock in record-low interest rates ahead of any increases by the US Federal Reserve, a recordamount of new sovereign bonds was sold in the first part of 2016.

The trend may continue as long as market uncertainties do not spoil investors’ interest.

According to Dealogic, a total of 79 new sovereign bond deals, for $212 billion, were sold from the start of the year through June 20. The amount is a sharp increase from the previous year. In the similar period in 2015, sovereign issuers placed 75 deals, worth $180 billion. Aside from 2013—a record year, with 68 deals worth $213 billion from January through June 20—the amount and the value of deals placed so far this year have been much lower than in any year since 2010.

In 2015 the most active region for sovereign bonds issuers was Europe, where Italy, United Kingdom and Spain represented the three most active issuers, followed by Belgium in fifth position and France in sixth. The return of Argentina to the international capital market placed that country fourth, with just a single deal, worth $16.4 billion. Qatar also ranked very high, despite having placed only one deal, for $8.9 billion.