EMERGING market (EM) debt issuance will soften in 2021 from 2020’s record highs but is likely to remain above pre-pandemic levels as still-elevated funding needs and improving risk sentiment support overall bond market activity.
EM debt issuers brought US$639 bil of eurobonds to market last year, exceeding the previous peak set in 2017 and breaking the US$600 billion mark for the first time as high-rated issuers secured financing in the wake of the pandemic, according to Moody’s Investors Service.
“In 2021, EM volumes are unlikely to eclipse 2020 levels as a pick-up in GDP (gross domestic product) growth and commodity prices supports revenue recovery and reduces emergency spending needs,” the credit rating agency pointed out in a quarterly EM issuance report.
“However, historically elevated budget deficits will still require significant funding.”
Moody’s further noted that improving global risk appetite and falling credit spreads will allow more non-investment grade issuers to access markets in the coming year.
“However, risks include a sudden jump in global inflation expectations, coronavirus containment challenges and concerns over rising EM debt burdens,” opined the report’s author and Moody’s senior vice president Rahul Ghosh.
“Issuers across larger emerging markets, notably China, have also benefited from strong local market appetite and liquid domestic capital markets to meet their financing needs.” – Jan 15, 2021