Iraq's first return to international bond markets since the end of US occupation

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Monday 14 Sep 2015 - 17:51 Makkah mean time-1-12-1436 (Image from google) Baghdad, (IINA) - Iraq is returning to international bond markets for the first time since the end of the US occupation as volatile oil prices weigh heavily on the country’s finances, Financial Times reported. The success of Baghdad’s first issuance, expected as early as this week, is likely to hinge on whether the US Federal Reserve will raise short-term interest rates on Thursday. Investors said Iraq’s plans to raise up to $6bn via a number of bond issues will bear the brunt of a shift in sentiment away from emerging markets if the Fed raises rates, with both the World Bank and International Monetary Fund (IMF) warning of possible turmoil. A rate rise will strengthen the dollar, encouraging money to flow back to the US and curbing international investor appetite for riskier assets. Analysts at UBS have warned that a crisis in emerging markets is approaching, and figures from the Institute of International Finance, an advisory body to financial institutions, suggest change is already under way, with outflows from emerging market equities and bonds reaching around $40bn in the past month. “I’m steering clear of the Iraq bond,” said one investor who was present at an Iraqi bond roadshow for potential European investors headed by Hoshyar Zebari, Iraq’s finance minister. “The variables are just too high.” The dollar bond sale, arranged by Citi, Deutsche Bank and JPMorgan, will be Iraq’s first since 2006 when the US helped it to restructure debt accumulated during Saddam Hussein’s regime. Baghdad hopes to use sales of dollar-denominated debt to fund a budget deficit caused by plummeting oil prices and the cost of military action against militants from Islamic State of Iraq and the Levant, which controls large areas of the north and west of the country. Iraqi debt is expected to reach 70 per cent of gross domestic product this year, up from just 32 per cent two years ago. SM/IINA