The Asian Development Bank (ADB) on Wednesday (3 June) said it has raised 21 billion Mongolian Tugrik (MNT) – about USD 7.5 million –  in a groundbreaking issue of the first offshore MNT-linked Nomad Bonds. The Manila-based multilateral lender said the issue sets a new benchmark in the international bond market for frontier currencies.

The ADB said the bond carries a 10.1 percent semi-annual coupon with an amortizing 5-year maturity. Denominated in MNT but settled in USD, the bond issue was underwritten by ING Bank and sold to a European asset manager, it added.

The ADB said the proceeds are deployed to fund ADB’s Gender Inclusive Dairy Value Chain Project for Milko LLC in Mongolia.

“This is a milestone transaction for ADB’s local currency operations,” ADB Treasurer Pierre Van Peteghem said in a statement.

“The emerging and frontier markets have come under pressure during the pandemic, therefore the ability to raise competitively priced term funding in Mongolian togrog at this time is a major achievement with tangible benefits in terms of currency risk mitigation for ADB’s borrower,” he added. According to the ADB, currency-linked bonds are important in development terms because they help plot a yield curve where government issuance is often sparse.

It said the Mongolian domestic government bonds have maturities of up to three years only, and the government has not completed any new issue of MNT debt securities since September 2017, therefore ADB’s nomad bond serves as a relevant benchmark.

ADB is a regular borrower in the mainstream international bond markets but has also led issuances in developing Asian countries as part of its efforts to promote local currency bond markets as an alternative to bank lending.

ADB has previously issued currency-linked bonds in Armenian dram, Georgian lari, Indian rupee, Indonesian rupiah, and Philippine peso.

Established in 1966, ADB is owned by 68 members, 49 from the region.