Pandemic-Stoked Bond Sales Set New Bar for Emerging Markets

(Bloomberg) -- Emerging-market hard-currency bond sales are heading for another big year in 2021 as governments and companies try to revive growth, though it will probably fall short of this year’s pandemic-stoked record.

Governments will borrow heavily for a second year to fund health-care and poverty relief measures, while pushing the investment needed to reflate their economies. Companies will borrow to cash in on that renewed growth, with loose monetary policy providing the liquidity they need.

“Our forecast assumes that financing conditions continue to be supportive for both investment grade and high yield,” Goldman Sachs strategists including Kamakshya Trivedi, Caesar Maasry, Danny Suwanapruti and Sara Grut wrote earlier this month. But, “funding needs come down as the cyclical recovery takes hold.”

Governments and companies from developing economies sold $757.1 billion in dollar- or euro-denominated bonds in 2020, the most in more than a two decades of data compiled by Bloomberg. By early November, emerging markets had already topped last year’s total sales.

Leading Sales

Investment-grade governments and companies made up about 70% of emerging-market dollar and euro debt sales this year, according to the data compiled by Bloomberg. The previous year, investment-grade deals were responsible for about 60% as more risky bond sellers came to market.

Governments in Mexico, Israel and Abu Dhabi were the top sellers of euro and dollar debt in developing markets. Financial companies were responsible for the second-greatest share of new bonds, according to the Bloomberg figures.

Next Year

In the pipeline for next year, Indonesian officials have said they are planning dollar, yen and euro-note sales. Meantime, Uzbekistan may place $700 million in Eurobonds and Egypt has already approached banks for a $7 billion deal in the first half. Slovakia’s debt agency said it may raise as much as 4 billion euros on the international market. And in Latin America, Bolivia’s president proposed tapping global markets for $3 billion next year, $1 billion more than his predecessor planned.

In emerging Asia, which led the developing world’s bond issuance in 2020, the junk bond market could be especially hot in the early months of next year as investors look for better yields. Laos, which has some of the lowest sovereign debt ratings in the region, may be among the sellers after it delayed a recent offering.

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Sales may also pick up in Latin America as the region continues stimulus spending to recover pre-virus growth levels, according to Citigroup Inc., the region’s second-biggest lead underwriter this year.

Read: Latin America Debt Sales May Hit Record Amid Sluggish Recovery

Clean Conscience

A focus on environmental, social and governance is expected to deepen in the coming year as the pandemic underscored the importance of social initiatives. Emerging-market companies and governments sold more bonds focused on addressing human needs such as housing, hunger and health, than ever before.

Chile, Hungary and Korea Housing Finance Corp were the biggest sellers in the emerging world of dollar and euro-denominated bonds with use of proceeds that support green, social or sustainable goals.

READ: Investors Dump Cash Into ESG Funds Focused on Emerging Markets

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