EBRD issues first TONIA-linked local-currency bond


The European Bank for Reconstruction and Development (EBRD) is supporting the development of the local capital market in Kazakhstan by issuing the first ever local-currency bond linked to the new tenge overnight index average rate, or TONIA.

KZT 12,500 million of the three-year bonds were auctioned at full issue price on the Kazakhstan Stock Exchange (KASE). Tengri Partners, a Central Asia-based merchant banking group, acted as arranger.

The three-year bonds pay a flat (zero-spread) coupon of the TONIA risk-free rate, calculated using the TONIA Compounded Index (TCI).

The TONIA and TCI were developed by the KASE, with the assistance of the Money Market Working Group, comprising the National Bank of Kazakhstan, the EBRD and the country’s leading financial institutions following international best practices. The KASE publishes the rate and index.

TONIA is a robust benchmark, anchored in the liquid overnight KZT repurchase agreement (repo) market. In line with market practices for indexing transactions to similar overnight risk-free-rates in other currencies, TONIA will be compounded daily and the compounded rate then calculated at the end of each interest period. Using the TCI simplifies calculations and reduces the risk of operational error.

KASE Deputy Chair Natalya Khoroshevskaya said: “The TONIA rate is an important component of the debt market of Kazakhstan, used for constructing the yield curve of government bonds. This benchmark is a reliable, representative and transparent indicator for participants in the local financial market. This bond issue is recognition of TONIA’s reliability as the main money-market indicator in Kazakhstan. KASE is planning to continue implementing necessary measures to develop the debt market and improve its benchmarks.”  

Huseyin Ozhan, EBRD Head of Kazakhstan, said: “This landmark transaction will stimulate the development of the local-currency market in the country. We also plan to use TONIA as the EBRD benchmark rate in our KZT lending. Bond issues of this kind from an AAA-lender such as the EBRD will improve the portfolio quality of any investor in Kazakhstan.”

The EBRD is a leading institutional investor in Kazakhstan. To date, the Bank has invested more than US$ 10.2 billion in Kazakhstan’s economy through 293 projects.

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