Emerging market bond sales surge amid opportunistic rush to debt markets

Emerging market borrowers have raised USD 331 bn in hard-currency debt so far this year, marking the fastest pace of borrowing in four years, as governments and corporates rush to tap global markets while demand stays strong, according to Bloomberg data. The total has already surpassed issuances from 1H 2024, driven by yield-seeking investors and a weaker USD.

Why now? Borrowers are securing financing before further market instability hits, after the first wave of tariff threats was somewhat subdued. Growing doubts about the dominance of US markets — and growing suspicions of a potential US recession — as US policy remains unclear are also pushing investors to tap into international markets. Demand is still strong even after the extra yield required for USD-denominated bonds from EMs — rather than Treasuries — has dipped, as investors anticipate spreads to widen further if the US economy is hit with a recession.

Who’s borrowing? More than 70% of this year’s issuance has come from investment-grade names. Saudi Arabia raised USD 12 bn across three tranches, and activity out of China has picked up. In frontier markets, Kyrgyzstan raised USD 700 mn in its debut international bond sale, drawing USD 2.1 bn in demand for its five-year notes priced at 8%. High-yield issuers like Brazil, Peru, and Telecom Argentina have also returned to the market, but riskier frontier borrowers remain on the sidelines.

Regional outlook: The Middle East is expected to account for over 40% of CEEMEA issuance this year, said Stefan Weiler, head of CEEMEA debt capital markets at JPMorgan. The dip in oil prices and revenues has driven up the need to source alternative financing.

Bank of America and JPMorgan expect EM assets to gain further if the USD continues to slide, while Société Générale has called current conditions a “goldilocks” moment for local EM assets, with most investors viewing EMs as a safe haven. However, the US’ review of its tariff policy in July could spur more volatility.

What’s next? Upcoming sovereign transactions could come from Poland, Romania, Kuwait, and Kazakhstan, while Costa Rica and Guatemala may also enter the pipeline. “If anybody wants to issue, we still have probably a four- to six-week window now. Otherwise, you have to wait until September,” said Claudia Calich, head of EM debt at M&G Investments.

IN OTHER PLANET FINANCE NEWS-

Warner Bros. splits in two: Warner Bros. Discovery will separate into two publicly traded companies by mid-2026, according to a statement picked up by Bloomberg. The restructuring will see its streaming and studios operations split from its TV network operations, as consumer habits shift increasingly online and more traditional media outlets face stiff competition from streaming giants.

MARKETS THIS MORNING-

Asian markets are in the green this morning amid rising hopes for a trade agreement between the US and China following trade talks yesterday. Japan’s Nikkei leads the charge with a 0.8% uptick, while South Korea’s Kospi and China’s CSI 300 are also up.

Over on Wall Street, futures are flatlining after the S&P 500 and Nasdaq notched gains yesterday.

THE CLOSING BELL-

The EGX30 rose 1.0% at Wednesday’s close on turnover of EGP 3.7 bn (23% below the 90-day average). International investors were the sole net buyers. The index is up 9.9% YTD.

In the green: GB Corp (+7.3%), Beltone Holding (+6.1%), and Qalaa Holdings (+3.6%).

In the red: Egypt Aluminum (-2.5%), Eipico (-1.2%), and Orascom Construction (-0.7%).