Oh dear, Mongolia's new dollar bonds "tentatively nicknamed Genghis Bonds" (h/t Katie Martin) have been hit by some shocking, hard to predict, political instability. From Reuters: One of the members of Mongolia's fragile coalition government has ordered its ministers to leave their posts, a move that has sent the country's bonds into a tailspin and could threaten the passage of crucial legislation. Mongolian bonds plunged $7-$8 on Wednesday on the news that the populist Mongolian People's Revolutionary Party (MPRP) was no longer prepared to work with the free-market Democratic Party, the country's biggest party, following June elections. The numbers had always been pretty dramatic with the $500m, five-year bond pushed out at 4.125 per cent yield and the larger 10-year $1bn at 5.125 per cent (Mongolia is not Spain is not x is not etc...) The offering was 10 times oversubscribed, attracting $15bn in bids and, for the record, the Mongolian economy sits at about the $10bn mark. Here's the ten-year issue from Bloomberg on Wednesday morning: According to Reuters, Mongolia's government has stated that it plans to sell a total of $5bn in bonds to finance the infrastructure required to develop its flourishing mining sector. And the WSJ has Mr. Chuluunbat, deputy minister for economic development, saying Mongolia will look to issue more international debt in six to 12 months, after "demonstrating that we are serious enough to handle the injections into the Mongolian economy, that the money is used for commercial projects and not for social handouts." This bout of political instability clearly isn't going to help that plan. As Pan Yuk quoted Robert Abad, emerging markets specialist at Western Asset Management, saying last week: But as we all know, the market has a very short memory, so it is not as surprising to see Mongolia accessing the markets at yields that do not fully capture the risks inherent in a fast growing country with a limited history of managing economic cycles. Although Mongolia's $10bn economy is one of the fastest-growing in the world and the country sits atop vast reserves of copper, coal and gold, Abad said he decided to sit out on the issue. "In my opinion, these yields reflect very little spread premium, if any, for the risk," he said. Related links: El Salvador and Mongolia: solid bet, or bubble? - FT's beyondbrics Mongolia invades debt market with Genghis Bonds - WSJ Mongolia to use bond to lure investors - WSJ