30 de septiembre de 2014 / 12:07 / en 3 años

Despite Fed, Russia, emerging bond issuance booms

* 2013 full-year total may already have been surpassed

* Volume remarkable especially in view of Russian absence

* European funds willing buyers due to euro zone yield falls

By Sujata Rao

LONDON, Sept 30 (Reuters) - Shrugging off fears over the Fed, Russia and a default in Argentina, emerging market borrowers are on track for record bond issuance volumes this year, and their 2013 level may have already been surpassed.

A total of $459 billion was raised in the first nine months of 2014, just above the $456 billion sold in the whole of last year, according to data from BNP Paribas. Emerging governments raised just over $100 billion of this, while the private sector accounted for $354 billion, BNP Paribas said.

Over the July-September quarter, $81.9 billion was raised, just under the same 2013 period.

These amounts are all the more remarkable because prolific Russian borrowers have been largely absent from bond markets due to Western sanctions over Moscow’s role in Ukraine.

There have been other troubles too, with a U.S. court ruling pushing Argentina into default in July. Many fear now that Ukraine and Venezuela will be forced into restructuring debt.

Forecasts that the U.S. Federal Reserve will start raising interest rates from mid-2015 have also had little impact, because yields on 10-year Treasuries, the benchmark for pricing most emerging debt, are well off 3-percent highs hit in January.

“We’ve already hit last year’s levels on both the corporate and sovereign side,” said David Spegel, head of emerging debt strategy at BNP Paribas

“So, despite the turmoil in Russia, the Argentina default and jitters about Venezuela, investors have continued to display robust appetite for emerging market bonds,” he added.

Separate data from Thomson Reuters shows $372 billion in issuance, $89 billion of that from sovereigns, while Bank of America/Merrill Lynch estimates $356 billion had been sold by September 22. Of that sovereigns accounted for $90 billion, compared to last year’s $81 billion.

Issuance figures often differ because of the way different compilers define emerging markets.


But Jorge Mariscal, emerging markets CIO at UBS Wealth Management said most emerging economies looked very different from Ukraine or Venezuela, which are in recession and hardly have any hard currency in their coffers.

“It would be a mistake to infer that the problems in Ukraine, Argentina and Venezuela are emerging market problems. Those are exceptions,” he said. “That explains why you continue to see good issuance from EM sovereigns and corporates overall and there is good receptivity from investors.”

Sovereigns that may issue debt in coming months include Kazakhstan, Serbia, Turkey, Poland, Cameroon and Tanzania.

Corporate bond issuance has risen steadily over the years, and is headed for another record, the following graphic, based on Thomson Reuters data, shows link.reuters.com/daq92w.

This year’s emerging issuance picture differs in two ways. One is the large amount of euro borrowing, with Thomson Reuters data showing 47.2 billion euros raised in the first nine months versus last year’s full-year total of 42 billion.

Expectation of policy easing by the European Central Bank (ECB) has lowered borrowing costs in the single currency, with 10-year German yields falling to around 1 percent. U.S. Treasury yields on the other hand are at 2.5 percent and likely to rise.

The market was also boosted by the low cost of swapping euro-denominated interest payments for dollars via so-called cross currency swaps that let issuers with dollar-based revenue streams to be compensated for currency and interest rate risks.

Lastly, the issues have found willing buyers among European funds which have suffered from a steady fall in euro zone yields and are keen to add higher-yield emerging debt to portfolios.

“Several things are favouring euro issuance. One is the cross currency issue, second there is a diversification element and third, a very low coupon, so altogether it’s very compelling,” said Jean-Marc Mercier, global head of syndicate at HSBC which has been active in the euro market this year.

The second feature is the absence of Russian bonds. Shut out by Western sanctions barring U.S. and European asset managers from buying new securities from several Russian companies, they have raised less than $10 billion so far this year.

“I’d say we were missing an additional $25-$30 billion on top of the $9.6 billion that’s been placed (by Russian companies) this year,” BNP’s Spegel said. (Graphic by Vincent Flasseur; Editing by Tom Heneghan)

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