Clear activity in the sovereign bond market with the start of the new year (Getty)
Developing countries have sold $39 billion in international bonds since the beginning of the year, as investors flock to junk debt, as they bet that global interest rates are close to peaking. Two weeks into the new year, it was Saudi Arabia is the largest exporter For sovereign bonds in foreign currency between different countries of the world.
The first half of January witnessed more than 20 dollar and euro denominated bond issues from 11 countries. Morgan Stanley data indicates that the current level of borrowing far exceeds the previous record of $26 billion raised during the same period in 2018.
All issues were oversubscribed at least three times, in a sign of a return to demand for emerging market debt After a year during which many countries were unable to enter the market With rising global interest rates.
“More and more investors are willing to spend cash and take on the risk,” said Mervell Baga, EMEA sovereign credit strategist at Bank of America. some risksIt added that issuers such as Romania and Hungary had offered “very attractive premiums” on their recently issued dollar bonds.
And Saudi Arabia, which is classified as a favorable environment for investment, is the largest borrower so far, after it sold dollar bonds worth ten billion dollars for terms of five, ten and thirty years.
High-yield countries joined the wave of issuance, as Turkey sold $2.75 billion in international bonds, at a yield of 9.75%, on Thursday, while Mongolia is also preparing to take advantage of the markets.
Morgan Stanley expects total sovereign debt sales to reach $143 billion in 2023, driven by sales from the Middle East and North Africa and countries that are classified as a favorable environment for investment in Asia. That’s well above last year’s multi-year low of $95 billion, but well below 2020’s record high of $233 billion.
It was not only emerging economies that sought to raise liquidity, but also US companies, European governments and other fixed-income market participants sought to ramp up issuance at the beginning of the year, as some raised funds to help mitigate the impact of the energy crisis.
“The upside in 2023 is that a lot of emerging market international bonds are not maturing,” said Gregory Smith, emerging market economist fund manager at M&G Investments, referring to what are seen as riskier emerging markets.
Smith added that Egypt will need to issue bonds in the medium term, but it may wait for market conditions to improve, with yields falling to between eight and nine percent, compared to a level in the double digits now.
(Reuters, The New Arab)
