Emerging-Market Bond Sales Are Soaring Again as Investors Dive Back Into Risk
(Bloomberg) — Emerging-market bond sales are roaring back from last month’s doldrums, as issuers from Brazil to Turkey take advantage of rebounding markets to raise fresh financing.
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Sales of dollar- and euro-denominated bonds from developing nations this month are already running some 200% above volumes seen last April, data compiled by Bloomberg shows. A total of $46 billion was raised through Friday, as governments and companies raced to capitalize on improved market sentiment amid hopes of a US-Iran peace deal.
The revival follows a plunge in bond sales last month, when the war crimped appetite for riskier assets. Now though, with markets again humming with activity and stocks on the cusp of recouping pre-war losses, emerging markets are once again looking like a favorite investment for investors on the hunt for yield.
“The EM bond market appears to have largely moved beyond the war risk for now,” said Laura Reardon, a portfolio manager of MFS Investment Management. “Deals that were in the pipeline ahead of the conflict and subsequently put on hold, are now coming to market, and investors have cash to deploy following the recent stabilization in markets.”
Reardon noted emerging economies’ recent track record of resilience — they bounced back swiftly from crises such as the pandemic and the Ukraine war, for instance. While many countries were hit hard by oil’s surge last month, swathes of energy-producing nations in Africa and Latin America benefit from high prices. In addition, the artificial intelligence capex boom is seen as a tailwind for the developing world.
Investors snapped up bonds from energy exporters Brazil and Qatar, while sales from Turkey and Poland were also well received, as new bonds typically pay slightly higher yields than existing issues. Among corporates, well-known names such as Banco do Brasil SA returned to market, alongside smaller firms like Kyrgyzstan’s Eldik Bank, which used the improved backdrop to make its dollar-market debut.
They were all encouraged by a slide in borrowing costs since Iran and the US agreed a two-week ceasefire. The average yield premium investors demand to hold emerging sovereign dollar bonds relative to Treasuries has retreated to about 245 basis points — below levels seen just before the war started.
