May 2025 marked a turning point for Kazakhstan’s debt market. According to a report by Bank of America Global Research, the country recorded the highest monthly return among all emerging markets with an Investment Grade (IG) rating, posting a +0.9% increase compared to the previous month, Zakon.kz reports.
However, this strong performance comes with a cautionary signal: Kazakhstan was the only IG-rated emerging market where bond spreads widened instead of narrowing, increasing by 36 basis points. In contrast, Peru and Turkey saw their spreads tighten by 96 and 53 basis points respectively - a sign of growing investor confidence in those markets.
A widening spread typically indicates that investors are demanding higher yields to compensate for perceived risks. Analysts link this trend in Kazakhstan to several factors, most notably the volatility of the national currency, the tenge, which is heavily influenced by global oil prices and external trade dynamics. Political and regulatory uncertainty within the country also plays a significant role.
Bank of America places Kazakhstan in a group of higher-risk IG-rated countries, alongside the Czech Republic and Peru. In these countries, spreads exceed 150 basis points, with an average bond duration of about 4.5 years - a level that highlights the market’s sensitivity to interest rate and macroeconomic changes.
Despite strong returns, investors remain cautious, looking for greater stability and predictability in Kazakhstan’s financial and political landscape before increasing exposure.
CentralasianLIGHT.org
June 10, 2025