TOP NEWS THIS WEEK
Federal Reserve rate increase expectations are growing among analysts
Yields on Mongolian government bonds are trending upward
Tsetsens Mining and Energy LLC (TME)'s rating has been affirmed at "B2"
INSIDE MONGOLIA’S BOND MARKET
Growing probability the Fed will raise its policy rate
The Federal Reserve decided by a 9-3 vote to keep its policy rate unchanged at 3.5-3.75%. Following this news, the yield on the 30-year US Treasury bond hit a 30-year high (5.21%), while yields on shorter-maturity bonds declined.
Analyst and market participant expectations:
Institution | Forecast |
|---|---|
JPMorgan | The Fed will raise its policy rate by 25 basis points in December 2026. Previously, they had forecast a hike in H2 2027. |
Macquarie | High probability of a rate hike in September. The key factor is that the number of FOMC members favoring a hike has risen to 3. |
Citi | The Fed will cut its policy rate later this year. |
Bloomberg survey of economists | The Fed will cut its policy rate by 25 basis points in Q3 2027. |
Fixed income market traders | Bond market participants estimate a 60% probability of a rate hike in September. |
Mongolian government bond yields rose
In July, yields on Mongolia's international USD bonds rose by 18-27 basis points. This was driven mainly by external factors — Fed monetary policy decisions and analyst expectations regarding emerging markets — rather than Mongolia-specific risk.
As we noted in a previous issue, a sharp rise in the Fed's policy rate and in yields on low-risk government bonds could directly increase Mongolia's cost of raising financing abroad.
Source: Bloomberg
FOR GOVERNMENT AND CORPORATE BOND INVESTORS
TME's $300 million bond rated "B2"
Moody's rated the $300 million bond issued by Tsetsens Mining and Energy LLC (TME) at B2 with a "stable" outlook. Moody's noted that TME's long-term power purchase agreement with the National Dispatching Center LLC — significant for Mongolia's energy sector — forms the core basis for stable cash flow generation.
Mongolia's electricity consumption has grown by an average of 8% annually over the past 5 years, and this pace is expected to continue over the next 1-2 years, which is seen as a positive for TME.
The first interest payment has been successfully made on the US$300 million bond issued to finance the Power Plant Project, which alone supplies approximately 30% of Mongolia's total electricity consumption and generates enough electricity each year to meet the needs of around 963,000 households.
TME bond details
Detail | Info |
|---|---|
Ticker | TSTSME 11⅜ 02/05/31 |
Coupon | 11.375% fixed |
Maturity date | February 5, 2031 |
Moody's rating | B2 (Stable) |
Last price | 107.50 |
Yield | 8.91% |
CLOSING PRICE & YIELD
Mongolian Government, Corporate Bonds
