The yield on the Ghana Eurobond maturing in 2017, a benchmark for African frontier markets, fell as low as 6.36% last week, a record since its issuance with an 8.5% coupon rate in September 2007. The new level of the yield carried in an Ecobank African Debt Market Update last week, justifies government's plans to venture into the international capital market for the second time to borrow. The report points out that the finances of most African countries are improving, as against those of developed countries that are deteriorating. Ghana ranked among the best performers in terms of accompanying indicators and economic prospects. According to the researchers at Ecobank Development Corporation, the research and brokerage arm of Ecobank, the bond which has 40 percent placed to U.S. investors, 36 percent with UK investors and the rest in Europe, underscores the rising confidence of the international investor community in the local economy which in a few months time is to become an oil producer. As of last year, Standard and Poor's and Fitch, both sovereign credit rating institutions had rated Ghana B+ Negative, with the note that the rating might improve once the West African country's new programme with the International Monetary Fund (IMF) gains ground and the country begins to make revenue from oil. The IMF has recently said that Ghana's gross domestic product (GDP) is underestimated. The Fund, which has since been collaborating with the Ministry of Finance and Economic Planning and the Ghana Statistical Service to correct the anomaly in national accounting, thinks Ghana's economy should be worth not less than US$35 billion as against the current estimate of US$18 billion. When officially concluded, the bigger GDP position should enable the West African nation to borrow more from the capital market, be it donor or the private capital market. At the budget ceiling of 60% of GDP, Ghana's total public debt position of US$9.2 billion as of December 2009 - made up of US$4.2 billion domestic debt and US$5.0 billion foreign debt - is not adverse. The total debt translates into 51.7% of GDP, below the budget ceiling. A bigger GDP therefore would increase the room for the Ghanaian economy to borrow more, as per the budget ceiling to undertake development projects. Comments from the local office of the World Bank last week advised the nation to tie any interest in venturing into the international capital market with productive investments ventures at home that can pay back on their own. Inflation and interest rates have seen consistent declines recently, raising consumer and investor confidence in the local economy. In the last, two years, government has been pursuing spending reforms that promote growth as well as stability. The latest year-on-year decline in inflation recorded in April was the 10th straight monthly decline. The benchmark 91-day Treasury bill rate declined from a two-year peak of 25.8% in October last year to 13.12 currently. The Ecobank African Market Research pointed out that the trends in Ghana's bonds tell a totally different story from more established emerging markets. "The extra yield that investors demand on emerging ¬market bonds has widened over the last few weeks, closing at 3.30% - the highest level in three months. The average yield on emerging market bonds has rallied to exceed 6.50% from a record low of 6.15% on April 15,” the report stated. According to the report, the Ghana Cedi has recorded a year-to-date appreciation of 0.83% against the US Dollar – making it the most stable currency in the African region so far. All other African currencies depreciated against the US Dollar or recorded insignificant appreciations in comparison to the cedi. Source: B&FT