Emerging markets’ bond boom accelerates as investors bank on upcoming rate cuts

Companies and banks in emerging markets — excluding China — sold some USD 250 bn in international bonds between January and July — the fastest pace of issuance since the post-pandemic boom of 2021, the Financial Times reports, citing figures from JPMorgan and S&P Global. JPMorgan sees 2025 issuances reaching USD 370 bn, just shy of 2021’s full-year record.

Falling borrowing costs are luring borrowers off the sidelines as markets begin to price in rate cuts under a second Donald Trump presidency. “The market is beginning to price in a more accommodative Fed,” said Ninety One Co-Head of EM Corporate Debt Alan Siow, with optimism that upcoming Fed rate cuts would outweigh fears over Trump’s tariff rhetoric, including recent threats of 50% duties on India and Brazil.

Spreads are tight — and risk appetite is holding. Though average yields on JPMorgan’s EM corporate bond index remain near 6%, spreads over ten-year US Treasuries have narrowed to below 2 bps — the tightest in nearly two decades. High-yield EM spreads have also compressed, signaling continued appetite for riskier debt.

Despite the issuance surge, net new EM corporate debt including China is actually negative YTD, as repayments are outpacing new supply by USD 8 bn. Companies are still refinancing cautiously after years of high interest rates and many pandemic-era bonds now maturing. “What is beneath the surface here is that, year to date, the net supply is negative,” Siow said.

Sovereign issuers have sold more than USD 160 bn of international debt YTD — outpacing the same period in 2020, which ended up being a record year. Saudi Arabia has led the charge with a flurry of sovereign and bank bond sales to finance megaprojects and offset soft oil revenues. Mexico also steered a USD 12 bn issuance to partially bail out state oil giant Pemex.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning, as traders sit tight in anticipation of the annual Jackson Hole Symposium. Japan’s Nikkei and the Hang Seng are flat, while the Shanghai Composite is inching up and South Korea’s Kospi is down 0.4%.

THE CLOSING BELL-

The ADX fell 0.1% yesterday on turnover of AED 816.4 mn. The index is up 8.4% YTD.

In the green: Al Ain Alahlia Ins. Co. (+15.0%), Oman & Emirates Investment Holding Co (+15.0%) and Abu Dhabi National Takaful Co. (+14.9%).

In the red: E7 Group PJSC Warrants (-5.6%), Hayah Ins. Company (-5.3%) and Emsteel Building Materials (-3.8%).

Over on the DFM, the index rose 0.1% on turnover of AED 463.6 mn. Meanwhile, Nasdaq Dubai was up 0.2%.