Tashkent, Uzbekistan (UzDaily.com) -- In February 2019, the first government bonds in the history of Uzbekistan were issued together with Gazprombank. What was the importance of this country’s debut entry into the international financial market?

-As for the entry of the Republic of Uzbekistan in February this year, we remember how they were met by markets. The most important thing for the debut placement is not even the coupon rate itself, to which the bonds reach as a result of the construction of the order book, but what interest they cause during secondary trading after placement. There and then you can see how high real demand is, and at what price the borrower takes credit risk, and there they determine the market level for each day. Uzbekistan is actively trading on the Eurobond market - after the tranches were released for 5 and 10 years, the price levels of each have so far narrowed by 130-135 basis points.

This suggests that the credit history itself was not just met with interest, but also all subsequent actions of the Government, relations with investors, the policy of liberalization and openness, consistency - were positively evaluated by the market. Hence the decrease in the yield of Eurobonds of the Ministry of Finance of Uzbekistan in the secondary market. With the release, there was a fairly large demand in the market, almost 8 times more applications were submitted than the volume of the final placement. This demand was unsatisfied and partially proved at the secondary auction. But he had to show himself at new placements. And here are the Uzpromstroybank (UzPSB) Eurobonds this week ...

As for the entry of the UzPSB in this context, firstly, it is an expected and absolutely logical decision - after sovereign issue state banks and major corporate borrowers come out. But banks are always vehicles of liquidity and they, in their activities, realize the achievements of macroeconomic stability.

-What were your expectations and further forecasts regarding the issue of the first corporate bonds?

Regarding the deal on the placement of UzPSB Eurobonds, we, in contrast to the issue of the Ministry of Finance of Uzbekistan, where we were one of the organizers, can only speak from the outside. But UzPSB is our partner in many areas in the Republic, and we, of course, followed the deal, shared experience and knowledge, where it was appropriate. And from the outside we know that demand was almost 4 times higher than the final offer and, in the course of the transaction, from the initial benchmark of 6.5 percent, we managed to reach a coupon of 5.75 percent in 5 years.

The rate of 5.75 percent is higher than the coupon (4.75%) on which Eurobonds of the Republic of Uzbekistan were placed for 5 years. This is absolutely normal, on average, state and largest banks of other countries are trading somewhere with a demand of 100-125 basis points for sovereign issue, so this can be considered a reference point.

The fact that today the secondary level of bonds of the Republic of Uzbekistan is lower creates potential in the secondary market to increase the price of UzPSB Eurobonds and reduce their yield. Already today we can see an increase in the UzPSB issue price above its face value, and accordingly, a decrease in profitability in the secondary market.

I think this downside potential still exists. The issue of UzPSB, the dynamics of secondary trading, all this together create good conditions for the subsequent entry of new Uzbek banks to the market. I would like to see the largest banks - NBU, Ipoteka, Asaka and a number of others among the new issuers. The market is already heard and familiar with the main players. I hope this consistent movement will lead to 4-5, and maybe more issues of Eurobonds from Uzbekistan next year.