Investors bought almost 40 billion worth of bonds
2023.01.13 10:57
Investors bought almost 40 billion worth of bonds
By Kristina Sobol
Budrigannews.com – Since the beginning of the year, developing nations have sold a staggering $39 billion worth of international bonds to investors who are eager to pile into riskier debt because they believe that global interest rates are approaching their peak.
More than 20 bonds in dollars and euros were issued by 11 nations in the first half of January. According to data from Morgan Stanley, the magnitude of the borrowing eclipses the previous record of $26 billion raised during the same time period in 2018.
After a year in which many nations were effectively shut out of the market as global interest rates rose, all sales were at least three times oversubscribed, indicating a renewed interest in emerging market debt.
Merveille Paja, EEMEA sovereign credit strategist for BofA, stated, “More and more investors are willing to deploy cash and take some risks.” She added that issuers such as Romania and Hungary had offered “extremely attractive premiums” on their recently issued dollar bonds.
Saudi Arabia, which carries an investment grade rating, has sold bonds with maturities of five, ten, and thirty years for $10 billion, making it the largest borrower thus far.
The issuance frenzy has also included nations with high yields. On Thursday, Turkey offered a yield of 9.75% on a Eurobond worth $2.75 billion, and Mongolia is also planning to enter the market.
Paul Greer, a portfolio manager at Fidelity International, stated, “A coupon of about 10%-ish is quite high even by Turkey’s standards.”
Simon Waever, a strategist at Morgan Stanley, stated that although yields are historically high, “most countries have no choice but to issue and absorb the higher cost.”
According to Waever, the year-to-date issuance was already equivalent to 40% of all emerging hard-currency bond issuance in 2022.
Even though emerging bond markets are off to a great start, this may not translate into a record-breaking year overall.
According to Morgan Stanley, investment-grade nations in Asia and the Middle East and North Africa will drive total sovereign debt gross sales in 2023 to $143 billion. That’s a lot more than the multi-year low of $95 billion from last year, but it’s still a lot less than the record $233 billion for 2020.
Head of Debt Capital Markets Origination Asia, Madhur Agarwal According to Japan’s JPMorgan statement, “investors see we are nearing the cap on U.S. interest rate hikes and it should be more stable going forward,” despite the fact that January is typically a favorable month for countries to issue bonds.
In addition to emerging economies, corporate issuers in the United States, governments in Europe, and other segments of the fixed income universe increased their issuance at the beginning of the year in an effort to offset the effects of the energy crisis.
According to Carlos de Sousa, a portfolio manager at Vontobel, Costa Rica and the Dominican Republic are among the nations that need to enter the market this year and are likely to do so soon.
“It does not imply that this is a limited opportunity. “It may be a long one, but the countries just don’t know and we don’t know either,” de Sousa continued, stressing that investors “were still very much on the defensive” just two months ago and accumulating cash.
According to de Sousa, most economies in Sub-Saharan Africa do not need to issue foreign debt because there are almost no bonds that will expire in 2023. However, Ivory Coast and Senegal will only do so if the market continues to rise.
Gregory Smith, an emerging markets fund manager at M&G Investments, stated, “The blessing for 2023 is that we haven’t got a huge spike in Eurobonds maturities for the frontier,” referring to the emerging markets that are thought to be the most risky.
He stated that Egypt would need to issue debt in the medium term, but that it might wait for better market conditions, as indicated yields are now in the 8- to 9-percent range rather than the double digits they were.
Smith stated, “The country needs to deliver on the reforms it promised the IMF.”
“Kenya and Angola will need to tap the market, while South Africa is staying away completely this year,” BofA’s Paja said, “but Nigeria could muddle through this year’s presidential election without borrowing.”
More Protesters in Peru demand the resignation of the President
