The long national holiday of Tsagaan Sar or Mongolia’s Lunar New Year is now behind us. Traditionally symbolizing a cleansing of the past and a renewal of purpose, Tsagaan Sar sets the tone for the year ahead. In 2026, as Mongolian families celebrated the White Moon, global investors began refocusing on Mongolia’s sovereign debt market with concrete developments emerging early in the year. 

Sovereign Bond Issuance Moves to Centre Stage

As noted in our January Bond Report, the Government of Mongolia had signaled potential early-year activity in the sovereign debt markets, supported by parliamentary approval to issue up to USD 1 billion in international bonds in 2026. This legislative flexibility laid the foundation for renewed issuance and liability management earlier than in recent years.

Aligned with these expectations, recently the government formally announced its plans to issue a new six-year USD-denominated sovereign bond issuance. Proceeds from this transaction are earmarked primarily for liability management: specifically the repayment of the maturing MONGOL 26 bond (USD 174.2 million approaching maturity) and to support a tender offer for portions of the outstanding MONGOL 28 and MONGOL 29 bonds. Bookrunning duties are being managed by HSBC, Morgan Stanley, and Standard Chartered Bank, consistent with Mongolia’s longstanding engagement with international capital markets.

While final sizing and pricing are yet to be confirmed, we have initial expectations around a USD 500 million+ issuance, designed to capture current investor sentiment and preserve capacity for later tranches should market conditions remain supportive.

What This Issuance Means

This sovereign issuance represents more than routine refinancing:

1. Establishing the 2026 Benchmark Curve

As the first sovereign issuance of the year, this transaction will anchor Mongolia’s 2026 benchmark funding curve. Pricing, orderbook depth, and investor composition will set the benchmark for subsequent sovereign, quasi-sovereign, and corporate issuers. 

Crucially, it will test whether the tighter yield environment seen in 2025 reflects durable investor confidence and a structurally lower cost of funding. The outcome will therefore shape Mongolia’s external cost of capital and investor risk appetite for the remainder of 2026.

2. Confirmation of Market Access and Investor Confidence

The re-entry into the international capital markets at the start of the year is significant, particularly as frontier markets often defer external issuance until later in the calendar year. Early-year activity signals Mongolia’s intent to maintain continuous access and reaffirms investor appetite for USD-denominated sovereign credit.

3. Enhanced Credit Visibility

Recent actions by rating agencies — including Moody’s assigning a B1 rating to the proposed new notes, aligned with Mongolia’s existing sovereign rating and stable outlook, emphasize the credit profile underpinning the issuance. The agency noted Mongolia’s improved fiscal metrics, a declining debt burden (from roughly 74% of GDP in 2020 to around 43% by year-end 2025), and continued access to global capital. At the same time, commodity dependency and external liquidity risks remain watch points.

4. Strategic Liability Management

By combining the refinancing of the near-term MONGOL 26 maturity with a tender offer for parts of MONGOL 28 and MONGOL 29, the government is actively managing its debt profile. This helps smooth future maturity walls, potentially reduce refinancing risk, and optimize the sovereign’s debt service profile without overly concentrating maturities in a single period.

5. Implications for Mongolia’s Macro-Financial Stability

The sovereign’s ability to refinance existing obligations and re-issue in the USD markets plays into broader macroeconomic stability. Higher yields in domestic currency markets and strong foreign credits in recent periods have underscored the attractiveness of external financing for long-dated obligations. This issuance will provide clarity on Mongolia’s external funding cost and shape the sovereign curve for secondary market instruments across tenors.

Broader Market Context

Notable issuers that might tap the market this year:

• Development Bank of Mongolia (DBM): remains a strategically important quasi-sovereign borrower. With evolving mandate adjustments aimed at financing large-scale development and infrastructure projects, DBM may seek to re-enter international markets to secure longer-term funding aligned with its project pipeline. Any issuance would be closely linked to sovereign pricing dynamics and overall investor perception of Mongolia’s policy framework. A well-received sovereign transaction would materially enhance DBM’s cost of capital and execution prospects.
• Mongolian Mortgage Corporation (MIK) has external maturities approaching in January 2027, creating a natural refinancing window beginning this year should market conditions prove favorable. As a structured finance-oriented issuer with exposure to Mongolia’s housing market, funding diversification and liability management considerations may support a pre-emptive market approach in 2026, particularly if sovereign spreads tighten.
• Golomt Bank: one of Mongolia’s systemically important banks, also faces early 2027 external maturities. Given its demonstrated offshore market access and improving sector fundamentals, Golomt may evaluate refinancing opportunities ahead of maturity to manage rollover risk and optimize funding costs. Sovereign benchmark stability will be central to spread calibration for financial-sector issuance.

Those structural developments set the backdrop for the sovereign’s return to market and suggest that Tsagaan Sar may indeed mark the beginning of a more active 2026 for Mongolia’s bond markets.