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HomeNewsJunk-Rated Borrowers Eye Slice of $64 Billion Deluge in Emerging-Market Sales

Junk-Rated Borrowers Eye Slice of $64 Billion Deluge in Emerging-Market Sales

(Bloomberg) — The 2024 bond-sale boom in emerging economies looks set to continue, including the possible return of high-yield borrowers in sub-Saharan Africa after a two-year hiatus.

Investment-graded issuers including Chile, Mexico and Hungary dominated the past week’s issuance activity, bringing the hard-currency debt sold by governments and companies in the developing world to $64 billion so far this year, just shy of the $66 billion for the same period of 2023.

Now, Ivory Coast is preparing to become the first country in sub-Saharan Africa to issue a eurobond after a nearly two-year hiatus.

Primary markets are witnessing hectic deal-making, even as a bond selloff has sent average yields in emerging-market dollar debt higher. Expectations for greater volatility later in the year, owing to US elections as well as the timing and pace of Federal Reserve easing, have created a sense of urgency to lock in current rates.

“Investors seem to have telegraphed this rush, and issuers are taking advantage of strong demand,” said Nathalie Marshik, managing director for fixed income at BNP Paribas SA in New York. “Chile may have issued before a potential downgrade, while Mexico is moving ahead of general elections. And we expect some quality BBs to come next by the end of the quarter.”

The market is seeing some big-ticket deals. Saudi Arabia offered $12 billion in bonds in its largest transaction since 2017, and its finance minister told Bloomberg Television more eurobond sales should follow. In Mexico, investors are expecting President Andres Manuel Lopez Obrador to accelerate spending in his final year in office. 

Some nations that can’t afford waiting for a further dip in US yields are also moving to cover their obligations. 

Chile has more than $300 million in payments due for the rest of January and a total of $1.1 billion in hard-currency coupons for the remainder of the year, data compiled by Bloomberg show. The Latin American nation opted to sell notes before credit-rating assessors had a chance to take a more pessimistic view, pricing bonds due in five years at a yield of below 5%. 

“Demand was good, so that is a good indicator for issuers. And investors have been prepared for new issuance, holding cash,” said William Snead, an analyst at BBVA in New York. “As for the second half of the year, let’s keep in mind that we are gearing to US elections and that could bring some extra volatility, so better now than later.”

Ivory Coast President Alassane Ouattara this week signaled the country’s intention to come to the market, without giving details about the size of the issue. Nigeria may also return toward the end 2024, according to Finance Minister Wale Edun. Other potential borrowers in the region include South Africa, Senegal, Kenya and Angola.

Pakistan, Angola and Kenya were among the best performers on Friday in a Bloomberg gauge of emerging-market sovereign dollar bonds. MSCI Inc.’s benchmark index for stocks was up by the most this year, while an index for developing-nation currencies had climbed 0.2% as of 12:40 p.m. New York time.

–With assistance from Philip Sanders, Kevin Simauchi and Srinivasan Sivabalan.

(Updates market moves in 11th and 12th paragraphs.)

©2024 Bloomberg L.P.