Euroclear announced it’s working with the Liquidity and Sustainability Facility (LSF) to create a repo solution for African Sovereign Eurobonds. The new facility will sit within Euroclear’s triparty platform.
There will be creation of a new standardized triparty basket dedicated to African sovereign Eurobonds composed of the universe of over 120 sovereign African Eurobonds that the LSF accepts as collateral in repo transactions. This basket, named LSF GC Africa Euroclear, will allow investors to trade in a standardized and high-quality framework on a wide range of African Eurobonds.
“In our role as a financial market infrastructure, we are pleased to be able to work with our colleagues at the LSF to bring this new solution to market, said Bernard Ferran, chief commercial officer at Euroclear, in a statement. “We believe this triparty basket could provide a new avenue for international investment in Africa creating market efficiencies and driving increased liquidity.”
“This new phase for the LSF, thanks to the creation of a global community of African Eurobond holders, and the coordination of a diversified pool of specialised counterparties on the repo market, enables liquidity in this asset class to be concentrated and organised efficiently” said David Escoffier, CEO of the LSF Secretariat, in a statement.
The repo financial mechanism of collateralized short-term loans has been established in mature economies to support their own government bonds’ liquidity for many decades. And for investors, a well-functioning repo market provides a simple and cost-effective solution for refinancing.
Designed with the support of the United Nations Economic Commission for Africa, the LSF has the dual objective of supporting the liquidity of African Sovereign Eurobonds on the repo market and incentivizing SDG-related investments such as Green, Social and Sustainability (GSS) bonds on the African continent.