Rwanda Bonds Slip as Rebel Group Claims to Seize Congolese City

(Bloomberg) -- Rwanda’s dollar bonds fell Monday after a rebel group aligned with the country said it had seized a key trading hub in the Democratic Republic of Congo, raising the possibility of a full-blown war between the two Central African nations.

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The price of Rwanda’s 2031 issue tumbled more than a cent for its worst day since March 2023, to trade around 84.3 cents on the dollar, after Congolese Foreign Minister Therese Kayikwamba Wagner told the UN Security Council Rwandan troops were crossing the border near Goma and her country considered Kigali’s support for the M23 advance a “declaration of war.”

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The Rwandan bond was the worst performer in a Bloomberg index of hard-currency debt from emerging and frontier markets on Monday, with its yield soaring 29 basis points to 8.84%.

“The losses are largely due to a higher pricing-in of political and economic repercussions from the latest escalation in the Eastern DRC,” said Mark Bohlund, senior credit research analyst at REDD Intelligence.

Bohlund noted that prior episodes of violence in June 2022 and March 2023 had led to the international community imposing sanctions against Rwandan military officials, while the latest events also put at risk financing flows to Rwanda.

“The selloff in Rwanda’s Eurobonds reflects fear that these sanctions will be stepped up and combined with suspensions of or reductions in bi- and multilateral grants and loans, which are significant for Rwanda’s balance-of-payments and wider economy,” he said.

The M23 group broke away from Congo’s army more than a decade ago, and is one of more than 120 rebel groups fighting in the region. Conflict between the two sides has intensified in recent months, causing the displacement of hundreds of thousands of people, exacerbating an already dire humanitarian crisis.

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Congo, the US and UN officials say M23 is backed by thousands of soldiers from neighboring Rwanda, which Rwandan President Paul Kagame denies.

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