Shunned Emerging Bonds Mark a Line Yield-Hunters Won’t Cross

(Bloomberg) -- The pile of negative-yielding bonds may be growing almost by the day, but emerging-market investors are shunning the nations offering the juiciest returns.

The Eurobonds of Lebanon, Suriname and Belize have all lost money since a global rally in riskier assets began about two months ago, despite being part of a very small club of sovereigns with yields above 10%, according to Bloomberg Barclays Indexes.

The debt of the only other member -- Zambia -- was also loss-making until the president replaced his finance minister over the weekend with someone traders think will have a better chance of fixing the economy. Yet even though its securities soared on Monday, they still yield 16.6% on average. Venezuela’s bonds have even higher yields, but weren’t considered because it’s in default.

Emerging-market sovereign dollar debt has returned an average of 4.6% since the beginning of May. In that period, Suriname’s notes lost 2.8%, Lebanon’s 1.2% and Belize’s 0.4%.

It’s a signal that even as investors clamor for higher returns, with yields across the globe being pushed down by central-bank stimulus, there’s a line they won’t cross. All three countries and Zambia are struggling to revive their economies and reduce their heavy debt loads.

To contact the reporter on this story: Paul Wallace in Lagos at pwallace25@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Robert Brand, Jacqueline Mackenzie

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