Bond issuing syndicates: The hidden force behind Eurobond mispricing in Africa

Over the past two decades, African countries have increasingly turned to international capital markets to meet their development financing needs. Despite the growing popularity of these instruments, African bonds are substantially mispriced, resulting in excessive high yields that are not justified by fundamentals. This mispricing imposes a heavy debt servicing burden on already constrained public budgets and undermines the long-term sustainability of sovereign debt. However, African countries are faced with a puzzling paradox in their international capital markets adventure. While all their Eurobond issuances are oversubscribed by 5 times on average, often seen as a sign of investor appetite and confidence, the cost of servicing these debts have remained disproportionately high and continue to rise above the 10% coupon rate mark. This contradiction raises a fundamental question of why African sovereigns are paying more interest when markets are clearly receptive. I argue that Eurobond mispricing in Africa stems from a variety of interconnected technical, institutional and market failures perpetuated by bond issuing syndicates.