Azerbaijan: attractive sovereign issuer thanks to new driver of economic growth

We expect Azerbaijan eurobonds to look attractive in the medium term due to the implementation of new projects in Nagorno-Karabakh, including in the field of sustainable development. Successful implementation of these projects, even amid the maintenance of a fixed USD/AZN exchange rate (now referred to as a factor holding back the sovereign rating), could help raise Azerbaijan's ratings to the IG level in the medium term. In case of transition to the IG group, Z-spreads of long-dated Azerbaijan eurobonds (e.g. those maturing in 2032) have the potential to narrow by at least 50 bps.