Kazakhstan’s Carry Moment: How the Tenge Turned Investable

• In June 2025, the Ministry of Finance of Kazakhstan raised $2.5bn via a tenge-denominated Eurobond that was 2× oversubscribed and priced in line with A/AA-rated sovereigns (Intellinews, 2025). This outcome is striking given Kazakhstan’s BBB rating at the time (Fitch Ratings, 2025), highlighting a material disconnect between headline credit ratings and investor demand for tenge risk.

• So, despite its credit rating and the tenge’s volatile history, what exactly is causing this surge in demand?

The Tenge Evolution

• On November 12^th 1993, the tenge officially became the national currency of the newly formed Kazakhstan. Three days later it came into circulation. Since the beginning, the tenge has experienced devaluations and the Kazakh economy has suffered many adverse impacts on business and trade transactions from the weak currency, with inflation reaching as high as 38 percentage points (Astana Times, 2023).

Recent Developments

• Currently, the sovereign wealth fund of Kazakhstan sells part of the FX it collects as oil tax to finance part of the fiscal deficit, while the National Bank of Kazakhstan conducts net FX operations linked to the state pension fund management and domestic gold purchases. As a result, the combined state net FX sales amount to about $1.0-1.5bn per month, providing structural support to the tenge (ING, 2025).

• Interestingly, since February the volume of public debt traded on the country’s stock exchange has risen by 15%, signifying significant interest in tenge-denominated bonds (KASE, 2025). What has changed? Why have investors suddenly become interested in tenge-denominated instruments?

Key Drivers

• Persistent inflation has been a thorn in the side of the economy since the country’s independence. This is why the Central Bank has held interest rates at record high of 18% this quarter, although price rises have slowed. The expectation now from the Bank is for inflation to be between 9.5% to 12.5% in 2026, slowing to between 5.5% and 7.5% the following year (Bloomberg, 2025). As foreign investors re-entered the local-currency debt market in search of carry, secondary-market turnover and publicly traded debt volumes increased, reinforcing liquidity.

• The rebound of the economy and strengthening policy credibility are likely to be significant influences. The Analytical Credit Rating Agency (ACRA) has released its updated forecast for Kazakhstan’s economy for 2026-2028, projecting annual growth of 5.3-5.9% which exceeds government and analyst consensus expectations (ACRA, 2025).

• Seasonality could be playing a role: the tenge tends to appreciate at the beginning of the year (February–March), mainly due to tax payments, and rises to May, followed by a subsequent depreciation (Centercredit, 2025). In addition, oil prices are a factor since crude exports make up a significant proportion of exports. However, Aliya Moldabekova, the Deputy Governor of the National Bank, rejects this thesis (NBK, 2025).

Risks to Keep in Mind

• The core macroeconomic risk is a sustained negative terms-of-trade shock. A fall in oil or metals prices, or a geopolitical disruption to key export routes via Russia would erode export revenues and pressure the current account from surplus into deficit. A long-tenge position would then face pressure from two directions: direct depreciation pressure from weaker fundamentals, followed by a potential collapse in the NBK’s intervention buffer if reserves come under strain. A credible stress scenario would be Brent crude sustaining below $60/bbl amid pipeline friction. (Kazakhstan Newsline, 2025).

• A strong Tenge hinges on the NBK’sability to keep a tight policy and maintain active FX intervention (The Astana Times, 2025). If any slowdown in these activities persist, then the KZT could re-price sharply weaker, as markets test how sustainable the regime is. 

• The base case is a controlled soft landing where inflation falls steadily. The NBK cautiously cuts rates in 2026-7, signalling victory over inflation without sparking panic. Carry decreases slowly, but the currency will still be stable. (Halyk Finance, 2025). A negative scenario would be where the NBK cuts rates too early, which signals a loss on inflation. Real returns will turn negative, therefore making the tenge an unattractive investment. Conversely, another possible negative scenario would be for inflation to re-accelerate, pre-empting rate hikes. Though this could lead to short term gains, this could potentially lead to long term negative impacts on policy credibility, as well as bonds (Halyk Finance, 2025).

Cordoba View

• Foreign demand for tenge assets is not rating-driven but carry-driven, reflecting high real yields reinforced by credible FX intervention and improving policy signalling.

• The sustainability of the tenge trade hinges less on oil prices than on policy discipline: premature rate cuts or weaker FX management would quickly unwind the re-rating and spiral the currency back into the uninventable stereotype.

• Special thanks goes out to Jibraan Manuel Mohammed, who co-authored this note and contributed to the research.

Correction (29 December 2025): An earlier version of this note incorrectly described BBB-rated credit as sub-investment grade; this has now been corrected following reader feedback.