Bond investors are following IMF reform packages: International bond market buyers are turning to high-yield emerging market bonds whose issuers are getting support from the IMF, Selcuk Gokoluk writes for Bloomberg. “The pledge of discipline and transparency that goes along with the aid has helped make” those countries the top performers outside the Americas this year, Bank of America Merrill Lynch indexes show. The list of these countries is topped by Iraq, Mongolia, Cameroon, Zambia, and Egypt.

Aaron Grehan, a fund manager at Aviva Investors, explained that “the uptick in sales from ‘less well-established’ markets means that ‘IMF involvement is even more relevant in the investment decision-making process… the presence of the IMF in countries that have demonstrated sustained economic improvement” offer the best chances of returns. Graham Stock, the head of emerging-market sovereign research in London at BlueBay Asset Management, supports Grehan’s view, saying “if we’re confident that a country is going to reach an agreement with the IMF and the policies underpinning that agreement are going to be sound, then that is a very favorable backdrop.” Stock bought Egyptian and Mongolian bonds on the strength of the Fund’s support. Allianz Global Investors had also made Egypt one of its top bond holdings after its reform program and IMF agreement.

…Emerging market debt in general is winning record inflows and strong investor demand, according to BNP Paribas’ Africa Weekly DCM Market Update. For Egypt, debt yields have fallen to record lows with the five-year bonds yielding 4.897%, dropping below 5% for the first time since issuance in January 2017. Strong post-summer secondary investor demand drove credit spreads down by 10-15 bps. Egypt’s 10- and 30-year bond yields also dropped to 5.9% and 7.3% respectively.