Milestones : Emerging Market Borrowers Indulge In Big, Bold Bond Spree


New emerging market issuance will be dominated this year by Brazil, especially Brazilian corporates. Christian Stracke, CreditSights Christian Stracke, CreditSights

Emerging market borrowers began the year with a charge to international bond markets, bringing nearly $9 billion in new issuance during the first two weeks of January, compared with $4.5 billion during the same period last year. Issuance has been driven by falling bond yields to three-month lows in the US and Europe, where treasuries yielded 4.03% and UK gilts 4.15% in mid- January.

Sovereign and corporate borrowers from Brazil, Colombia, Mexico, Costa Rica, Turkey and Venezuela were among those taking part in early Januarys issuance spree, while investment banks were also vying for a mandate for Indonesias return to the international capital markets after an absence of seven years.

While helping emerging market borrowers to lock in lower rates, this years new deals have also extended maturities. Brazil, for example, launched a $1.5 billion 30-year global bond via Citigroup and Deutsche Bank that was a significant improvement over its average maturity of only 10 years for its new issues in 2003.

New emerging market issuance will be dominated this year by Brazil, especially Brazilian corporates, South Korean corporates, Russian corporates and banks and Mexican corporates, says Christian Stracke, head of emerging market research at CreditSights, an independent capital markets research firm. Stracke believes Turkey and Poland will also be well represented.

Investor appetite remains strong, with demand for Brazils $1.5 billion global deal reportedly soaring to as much as $7 billion. If US rates remain relatively low, with 10-year treasuries at or around 5%, Stracke predicts emerging market issuance will continue, noting that the situation has even prompted US and European high-yield investors to consider emerging market debt for the first time.They are now more willing to broaden their horizons and take a lot more risk,he adds.

Santiago Fittipaldi