Emerging Markets Defy Global Turmoil with Record Debt Sales
The first half of this year saw an unprecedented boom in emerging market debt sales, with volumes soaring despite a turbulent global landscape marked by trade tensions, geopolitical conflicts, and volatile oil prices. Bankers tell Reuters that the market is on track for another record-breaking year, even showing early signs of a shift away from the U.S. dollar.
Cash-rich investors, eager for higher returns and portfolio diversification, continued their buying spree largely unfazed by events like U.S. President Donald Trump’s tariff announcements or Israeli attacks in Iran. This sustained demand, coupled with increased borrowing from oil-exporting nations to fund spending amidst lower oil prices, is driving the record supply of new bonds.
“Astonishing” Resilience and Volume
“What is astonishing this year is how markets… were still active, if not very active, in the toughest moments of the globe,” remarked Alexis Taffin de Tilques, global head of emerging markets sovereigns at BNP Paribas, highlighting the “incredible” volumes of issuance. Stefan Weiler, head of debt capital markets for CEEMEA at JPMorgan, confirmed that debt sales in the Central and Eastern Europe, Middle East, and Africa (CEEMEA) regions alone surpassed $190 billion in the first half, poised to exceed last year’s all-time record of $285 billion. This surge underscores robust investor interest in emerging market assets, even in times that would typically send investors seeking safer havens.
Gulf Region Leads the Way, Diversification on the Rise
The Gulf region, spearheaded by Saudi Arabia, accounted for over 40% of CEEMEA debt issuance as companies and countries capitalized on favorable interest rates. Khaled Darwish, head of CEEMEA Debt Capital Markets at HSBC, noted that Middle East issuers have already raised $106 billion in bond and sukuk deals this year, close to last year’s full total of $139 billion, with geopolitical events having “quite minimal” impact on the GCC market.
Interestingly, geopolitical instability has even fueled demand for certain sectors, like defense companies, as NATO countries increase military spending. Czech defense firm CSG, for instance, more than doubled its bond issue due to strong investor interest.
Beyond the robust volumes, there’s a notable trend towards diversification. Citi’s debt finance team reported a 20% year-on-year increase in global emerging market issuance, with corporate bonds growing particularly fast. New issuers, such as Saudi mining giant Maaden and Angola’s Azul Energy, are entering the market, providing investors with more options.
Moreover, there’s a growing move by governments and corporations to issue debt in currencies other than the U.S. dollar, primarily the euro, but also Japanese yen, Chinese yuan (Panda bonds), and even Swiss francs. “There’s definitely a theme among global issuers currently exploring more non-USD financing alternatives as borrowers are seeking to achieve less reliance on USD-denominated funding,” explained Weiler, viewing this as an early sign of “de-dollarisation” and a “clear trend.” Another shift is away from 30-year issues, as steeper yield curves globally make longer-term borrowing more expensive; issuers are now favoring shorter-term, three-year transactions.
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