by Stephan Pouyat, Global Head of Capital Markets and Funds Services, Euroclear

What does Euroclearable mean?

A capital market becomes Euroclearable when it establishes a settlement link with Euroclear, the international central securities depository (ICSD), and adopts the legal, regulatory and other market standards that provide the same ease of access, degree of asset protection and settlement finality that international investors would experience in any well-established market.

"Capital market reform for the good of the market"

Market liquidity brings investors

Peru’s strategy to 'solarise' its debt and make it Euroclearable has been well rewarded as today's liquidity of the Euroclearable bond is 10 times better in comparison to the average liquidity of old soles bonds. At the same time the issuer has seen its cost of borrowing reducing by 20 to 25 bps.

By issuing its bond via Euroclear, the Peruvian Ministry of Economy and Finance aimed at attracting both local and international investor communities.
And it succeeded: not only the demand for this new bond was huge, with subscriptions up to 9 billion USD, but also non-resident investors' participation reached a record level of 70% ! Similar domestic government bonds issued before by Peru reached an average 33% non-resident investors' participation.

By facilitating this inflow of capital into Peru and increasing the demand for the bond, we are helping the Peruvian government finance its infrastructure projects such as new roads, airports, port, etc. at a lower cost, which ultimately contributes to the local socio-economic development and jobs creation.

This deal has also led the index providers to look again at Peru. JP Morgan’s Emerging Marketing Index has indicated that inclusion of the recent bond issue will see Peru’s weighting in its emerging markets bond index rise by 41 basis points, to 2.7%, allowing international investors to increase their holdings of Peruvian government debt accordingly.

Creating a sustainable future

In the future, Peru wants the government bond market to serve as a benchmark for the country’s corporate bond issuers. Alfredo Thorne, the previous Minister of Economy of Finance, said he would also like to see the Peruvian firms, issuing in the foreign markets, bring that debt back to the local market.

It’s all compelling stuff in my view.

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Stephan Pouyat

As Global Head of Capital Markets and Funds Services at Euroclear, Stephan Pouyat cares passionately about aligning the financial sector with moves to accelerate development among the world's emerging economies.