DBRS Morningstar Releases Commentary on the Final Condition Needed to Trigger World Bank’s Pandemic Bonds

DBRS Morningstar released a commentary entitled “Growth Rate of Eligible Coronavirus Cases Is the Last Hurdle to Trigger World Bank’s Pandemic Bonds” that discusses the latest contagion trends in the International Development Association (IDA) and the International Bank Reconstruction and Development (IBRD) countries and the prospect of the bonds paying out to the Pandemic Emergency Financing Facility before their initial maturity in July 2020.

The key highlights include:

-- On April 9, 2020, the World Bank announced that the pandemic bonds had not been triggered as of March 23.
-- The last condition to be met in order to trigger the bonds is the exponential growth rate of Coronavirus Disease (COVID-19) cases to be positive for IDA/IBRD countries in the 12-week rolling period preceding its calculation.
-- Although the number of cases continues to rise globally, the calculation period from December 31, 2019, to March 23, 2020, is heavily influenced by the jump in cases in China and subsequent stabilization by mid-February.
-- Based on the trend in the number of coronavirus cases in IDA/IBRD countries, the calculated growth rate could turn positive in late May when the impact of the trajectory of Chinese cases will drop out from the rolling calculation period.

“The trajectory of the growth rate for the number of cases in IDA/IBRD countries will depend on a number of factors, including broad accessibility to testing in the developing world and the effectiveness of social distancing measures,” says Marcos Alvarez, Senior Vice President and Head of Insurance. “Based on the recent evolution in the number of cases in IDA/IBRD countries and our calculation of the growth rate using the prescribed formula, DBRS Morningstar estimates that it is still possible that the pandemic bonds will be triggered before their maturity.”

Notes:
The commentary is available at www.dbrsmorningstar.com.

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