Senegal Bonds Rally as Investors Bet Crisis Nears End

(Bloomberg) — Senegalese President Macky Sall’s pledge to step down at the end of his term was cheered by investors, following weeks of turmoil sparked by his attempt to stay in power.

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Prices on Senegal’s dollar eurobonds rose on Friday for the first time in four days, lowering yields on the notes due May 2033 by 10 basis points to 8.73% after his announcement late the previous evening. The nation’s dollar bonds due March 2048 also advanced.

Sall set off a constitutional crisis in the West African country, long thought of as one of the continent’s most stable democracies, when he postponed elections scheduled for Sunday and lawmakers proposed extending his tenure by 10 months. The government cracked down on mass street protests, arrested opposition leaders and cut off the internet as it tried to contain the fallout.

The president’s attempt to stay also unnerved the country’s democratic neighbors — in a part of Africa roiled by coups — investors and western donors including the US. Neighboring Niger, Burkina Faso, Mali and Guinea are ruled by military juntas that overthrew elected governments in recent years. After weeks of uncertainty in the country, Sall said he will step down when his second term ends on April 2.

The president’s opponents remain unconvinced. His speech was “unclear, which means more uncertainty,” opposition lawmaker Sokhna Ba said in a text message. “I’m not reassured.”

Sall said a new election date will be set following two days of consultations with political leaders starting Monday. The talks will also determine how Senegal should be governed after he steps down and until elections are held. If there’s no consensus, the decision will be referred to the Constitutional Council, the nation’s top court, Sall said.

“It’s clear that the country cannot remain without a president,” he said. “It has never been the plan to go beyond my constitutional mandate. I’m sticking to this and say very clearly and very solemnly, on April 2, I end my time at the head of Senegal.”

But Ba cited Sall’s vowing to step down before his successor could be chosen as a reason to doubt it.

“It is likely that there will be continued volatility in the trading of Senegal’s Eurobonds until there is more certainty about the political outlook,” said Mark Bohlund, senior credit research analyst at REDD Intelligence.

Sixteen of the 19 presidential candidates approved to contest the vote on Friday rejected the President’s call for talks, saying elections should happen before April 2.

“The president says his term has come to an end, promising to step down, only to plunge us into certainty about his real intentions,” Babacar Anta Ngom, one of the candidates, told reporters in the capital, Dakar. “I reject this sham dialog.”

Deadly Protests

Sall earlier this month postponed the presidential vote to allow for an inquiry into the process of selecting candidates that could run. Lawmakers later sought to amend the constitution to delay the vote for ten months and have the president’s term extended until a successor takes over. That sparked the protests and clashes between civilians and the security forces across the country, that claimed at least three lives.

The nation’s top court later ruled the parliamentary decision was unlawful.

When the top court said the government should organize an election as soon as possible, the premium in the country’s bonds basically dissipated, said Samir Gadio, head of Africa Strategy at Standard Chartered Plc.

“I don’t necessarily think that we will see another leg of rally before we get clarity at this point,” Gadio said. “From here we’re shifting toward the situation where the market wants a clearer understanding of the time line of the elections and then investor focus will shift on to the actual election outcome,” he said.

Business Confidence

The increased political uncertainty in Senegal and West Africa more broadly should weigh on business confidence, Fitch Ratings said in a Feb. 21 report. “Any disruption to fiscal consolidation and reforms could complicate Senegal’s access to funds worth 1.2% of expected GDP in 2024,” the ratings firm said.

Under a $1.5 billion program with the International Monetary Fund, the expectation is that Senegal’s economy will grow by 8.3% this year, a forecast that could now “be at risk,” Fitch added.

Senegal’s constitution states that the office of the president passes to the parliamentary speaker in the event of a vacancy and fresh elections must be held within 90 days.

Under Senegalese law, the election campaign should span 21 days and a vote should be held at least one month before the president’s term expires.

–With assistance from Moses Mozart Dzawu.

(Updates with comment from presidential candidates in 10th paragraph, bond investor comment in 15th.)

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