Nomad bond to cut bond interest payment by 26.7 million USD

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Minister of Finance Ch.Khurelbaatar announced that a blockchain-based government bond christened Nomad has raised 600 million USD on the international market on Monday.

“Over the past three weeks, the Ministry of Finance and Mongol Bank has successfully traded a new bond called ‘Nomad’ on the international market. The new bond is worth 600 million USD and has an annual interest rate of 5.125 percent with an amortizing 5.5-year maturity. Issuing a new bond doesn’t mean the money will come into Mongolia’s account immediately. We’re simply exchanging a high-interest bond with a low-interest bond. The annual interest rate of the government’s 2016 Mazaalai bond will reduce to 10.872 percent and the 2012 Chinggis Bond’s to 5.125 percent,” the minister noted.

The Mazaalai Bond, worth 500 million USD, will mature in 2021, followed by the 1 billion USD Chinggis Bond in 2022. The government has launched the new offshore bond to refinance the Mazaalai bond and postpone repayment of Chinggis bond. The Chinggis bond was released with 5.125 percent interest rate in 2012 when Mongolia’s economic growth rate was 17.5 percent and foreign and domestic investments had intensified. Given the 9.7 percent contraction in the economy due to adverse impacts of the pandemic and high fiscal debt, the government decided to issue a low-interest bond this year.

Mongolia pays 203 million USD a year as interest payment for Mazaalai, Chinggis, Gerege and Khuraldai bonds. By exchanging them with the new bond, the annual interest payment will decline to 176.4 million USD, according to Ch.Khurelbaatar. In other words, the bond repayment is being cut down by 26.7 million USD, or around 70 billion MNT. This is expected to ease bond repayment pressures and contribute to ensuring economic stability in the coming years.

HSBC, JP Morgan, Morgan Stanley and Nomura are cooperating with the government on the trading of the Nomad Bond.

Dulguun Bayarsaikhan