EM remains under severe pressure. The less dovish than expected Fed, renewed trade tensions, and a broad-based dollar rally have conspired to absolutely crush EM FX and equities. These drivers are likely to carry over into this week and so we remain bearish on EM.
Central and Eastern European sovereign bond markets came to life in the second quarter of 2019, a period that saw a sharp rise in traditional US dollar borrowers – and investors – switching into euro notes across the region. The dynamic reflects a tangible recovery in EM debt sales amidst the ECB’s and the Fed’s dovish tilt, but just how long the hunt for yield will prevail is far from clear.
Romania’s Eurobond, the largest ever from the country’s Finance Ministry and first EUR-denominated triple-tranche from a sovereign issuer in 2.5 years, has raised the stakes in the typically quiet CEE debt markets.
A much-oversubscribed sovereign bond issued by the Republic of Egypt earlier this year reinforced a sense of optimism among emerging market investors about one of the region’s most promising economies, but analysts caution that the sustainability of the country’s improving macro, growth and investment outlook fundamentally hinges on deeper empowerment of the private sector and removal of the military from civilian industry.
With geopolitics becoming increasingly defined by nationalism – both economic and political – sanctions have become a common means of exerting soft power in the international arena. Yet the extent to which the threat of punitive economic measures may impact investors remains unclear.
Branko Drcelic, Director of the Public Debt Administration at the Ministry of Finance, Serbia sat down with Bonds & Loans to discuss how the country moved from chronic deficits to a healthy surplus, catalysing a local currency debt capital market in the process.
Corporate borrowing in India is set to get a lot more challenging as investors search for higher coupons and banks tighten up their lending practices following a build-up of non-performing loans, according to analysts. It is unclear whether even the country’s largest corporates are immune to the sandwiching of rising interest rates and a banking sector in flux.
Just a few years ago, barely any debt capital markets investors would have paid much attention to regions like Central Asia and the CIS. Yet with overwhelming demand for sovereign notes issued by the likes of Belarus and Tajikistan, regular issues from Kazakhstan and a highly anticipated debut Eurobond from Uzbekistan, the region is putting itself on the EM fixed income map.
After a traumatic few years catalysed by the annexation of Crimea and the ensuing civil conflict with its easternmost regions, Ukraine has developed a certain degree of flexibility in managing a series of shocks encountered since. But a lack of progress on crucial reforms, political mismanagement, and consistent lack of access to credit for key sectors like agriculture threaten the progress achieved so far.
Despite a conspicuous rise in tensions between Turkey and some of its closest neighbours and allies, the country finished 2017 as one of the fastest growing economies in the world – thanks in part to an unprecedented fiscal stimulus that helped among other things stoke the continued deepening of the capital markets. Against that backdrop, a number of leading issuers and borrowers once again set new benchmarks in the credit markets for 2018, securing a number of ‘firsts’ while making the market more robust.
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