Bond Market Development and Public Debt Evolution. The Case of Cameroon

Abstract

This dissertation aims to study the bond market development of Cameroon and its contributions to the evolution of Cameroon's public debt. It has as specific objectives to present and analyze the 2014 IMF-World Bank Cameroon's debt sustainability analysis (DSA) and to evaluate the drivers of the 2015 Cameroon's Eurobond issue. The study confirms that despite a widening bond market spectrum in recent years (with tenors from 3 month to 5 years on domestic bonds and the 10 years Eurobond), bond markets in Cameroon remain relatively underdeveloped. It acknowledges that the bond market has not reduced but rather, it has increased the stock of Cameroon public and/or external debt. Debt sustainability report confirms that the risk of debt sustainability will keep increasing as the government keeps adding new issues into existing pile of domestic and external debt. The risk of debt sustainability can be higher if the oil prices turn to fall as projected (Scenario and sensitivity analysis for Cameroon- IMF-World Bank DSA 2014). The study acknowledges an inverse relationship between commodity prices and the yield of the Cameroon 2015 Eurobond issue. Therefore the low oil prices in 2015 is actually a vital justification for the high yield offer for her 2015 Eurobond. It further confirms a positive relationship between volatility index and Eurobond yield and noticing no role of foreign exchange on yield.