Is it 1997 all over again? EM bulls scoff at the idea: this time, they say, is different, and for solid reasons.
Two things especially have changed, according to this view. Emerging markets no longer have such high levels of debt relative to GDP. And whereas in the 90s many EMs had a lot of dollar-denominated debt backed by local-currency revenues (the so-called “original sin”), much of this has been replaced by local-currency debt.
But have things really changed that much? Continue reading »
Global bond sales from emerging markets have defied all odds to hit a record high in 2013.
Despite the market turmoil caused this summer by concerns over the US Federal Reserve’s plans to scale back its monetary stimulus programme, EM bond issuance jumped to $506bn last year, surpassing the record $488bn in 2012, according to data from Dealogic. Continue reading »
Few expected September to be a record month for sovereign debt auctions. Ever since the US Federal Reserve first hinted in May at a possible “tapering” of its massive bond buying programme, emerging market countries have found borrowing much tougher and more expensive. Borrowing costs soared and issuance shrunk accordingly.
But then Fed decided to keep the printing presses whirring and EM yields settled down a bit. Not surprisingly countries took the opportunity to issue debt. The result? September ended up being the best month for EM sovereign debt issuance this year. Continue reading »
The party is back – thanks to Ben.
Over the past two days, borrowers from Colombia to Sri Lanka have rushed to take advantage of the window of opportunity created by the US Federal Reserve’s decision to keep the QE punchbowl flowing, raising at least $5.3bn on the international bond markets. Continue reading »
What's the yield on that?
What’s the going rate for a Kardashian? A yield of 6.25 per cent, according to Armenia’s bond issue.
The “Kardashian”, as it has been dubbed by Standard Bank’s head of emerging markets research Timothy Ash, will be issued in Armenia’s first international sovereign debt sale. Named after Kim Kardashian, a US celebrity whose family (see left) is originally from the country, the dollar bond is the latest exotic asset to have attracted investors’ gaze. Continue reading »
Hungary shows all the signs of joining the emerging markets rush to tap bond markets before the onset of any tapering gains effect, gearing up for a US bond issue of up to $5bn, according to a shelf registration filed with the Securities and Exchange Commission in New York on Tuesday. Continue reading »
We have said it before and we will say it again: reports of the death of emerging markets have been greatly exaggerated.
Two major bond issues from Russia and South Africa this week, totalling $9bn, offer further proof that, despite the sharp sell-off in EM assets during the QE taper talk since May, there is still appetite from investors for EM debt – if the price is right. Continue reading »
Remember those Genghis bonds?
Back in November, eyebrows were raised in the emerging markets debt investment community when Mongolia – a country that has been rescued five times in the past 22 years by the International Monetary Fund – managed to raise $1.5bn at a price below Spain’s borrowing costs.
At the time, many took the sale – equal to nearly one-fifth of the size of Mongolia’s economy and akin to the US borrowing $2.5tn in one go – as yet another sign that investors, flushed with cash and desperate for yields, were jumping into markets that they don’t fully understand.
Fast forward eight months and the skeptics appeared to have been proved right. Continue reading »
It’s a sign of the times. Ghana on Thursday raised $750m from the sale of 10-year eurobonds, but the deal did not come easy.
With investors more cautious about lending to frontier countries with shaky finances following June’s violent market rout, Ghana had to pay a premium to get the deal off the ground. Continue reading »
To paraphrase that famous quote from Mark Twain, the reports of the death of investor interest in emerging market bonds appear to have been greatly exaggerated.
For proof, look no further than the spate of issues so far this month. This week, Bahrain successfully sold $1.5bn of bonds, joining Indonesia, Nigeria and Mexico’s Pemex in tapping the market following June’s market rout. Continue reading »
Look away now emerging market junk bond investors. What you are about to see is not pretty. While the sell-off in emerging market assets over the past few weeks has been pretty indiscriminate, EM high yield corporate bonds – having been one the main beneficiaries of investors’ “dash for trash” – are being hit harder than most.
Here’s a chart summing up the damages, courtesy of David Spegel, global head of emerging markets strategy over at ING. Continue reading »
By Robert Abad of Western Asset Management
The recent spike in the volatility of emerging market debt has rattled investor confidence in the asset class. After a promising start to 2013, valuations of EM US dollar-denominated sovereign and corporate debt have hit the proverbial wall on increasing market concern that the US Federal Reserve may begin to “taper” or slow the pace of quantitative easing measures in effect since 2009.
Many are now wondering whether a normalization of US monetary policy might produce a repeat of 1994, when emerging economies and the EM asset class collapsed following the Fed’s decision to tighten. Continue reading »
Rising US interest rates along with a China hard landing have long been cited as two of the biggest risks to emerging markets assets.
So how did the markets react to the relatively hawkish comments made on Wednesday by Ben Bernanke, chairman of the Federal Reserve, and the sluggish manufacturing data that came out of China on Thursday?
Pretty much with a shrug. Continue reading »