Iraq Bonds Rally on New Optimism

"Trading in Iraqi bonds has increased" (12/7/07)
Assistant director in New York at Exotix, Amir Zada said:
"I've seen much larger volumes... Blocks of $10 million, and even $30 million to $40 million, have been traded more recently. The average used to be $2 million to $3 million."
"The country's yield spreads remain the highest in the world."
"Incredibly Dangerous".. "It's still Iraq, an animal unto itself; an incredibly dangerous country." Zada said.

Lester Pimentelat Bloomburg reports:
Iraq Bonds Rally on U.S. Troop Surge, Oil Earnings
Holders of Iraqi bonds giving Bush vote of confidence.
The country's $2.7 billion of 5.8 percent bonds due in 2028 returned 15.2 percent since July, according to JPMorgan Chase & Co. index data. Only Ecuador's debt gained more, rising 18 percent. Iraq's securities yield 6.21 percentage points more than Treasuries, the most of any dollar-denominated government debt.

While the war in Iraq has dragged Bush's approval ratings lower, his policies in Iraq have turned around investor opinion on Iraqi debentures. The addition of 28,000 troops in the first half of the year has reduced terrorist attacks in the country by 55 percent, the U.S. embassy in Iraq said on Nov. 18. ...And other factors.
"We've had a shift in sentiment," said Gorky Urquieta, who oversees $14 billion of emerging-market debt at ING Investment Management in The Hague. Read more

Investor optimism on Iraqi debentures...
Iraq sold bonds to international investors two years ago as part of an agreement by creditors to drop claims on $14 billion of debt dating from the regime of former President Saddam Hussein. The securities are unrated.

The notes began trading at 64 cents on the dollar on Jan. 13, 2006, and slumped to 55 cents in August, pushing the yield to 11.53 percent, according to Bloomberg data. Today, the bonds are back to 64.25 cents to yield 9.95 percent, according to Exotix Ltd., a broker of distressed debt. Full story
A 46 percent increase this year in the price of crude oil, Iraq's biggest export, has also boosted demand for the debt. Production rose to 2.5 million barrels a day from 2 million in September, Oil Minister Hussain al-Shahristani said last month. Crude reached a record $99.29 a barrel on Nov. 21.
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