LONDON, June 29 (Reuters) - Emerging market sovereigns borrowed just over $80 billion in international bond markets in the first six months of 2016, a 50 percent jump over year-ago levels, thanks to hefty new issues from Argentina and Qatar.
Bond sales by emerging companies were however down by 15 percent to $134 billion as of June 27, data from Bank of America Merrill Lynch showed, as Russian and Brazilian firms mostly stayed away despite a slight pick-up in the second quarter,
Global market turmoil early in the year pushed emerging debt sales to a six-year low, but signs U.S. rates would rise more slowly than expected has since allowed markets to recover.
A fall in U.S. and German yields, from which emerging debt is benchmarked, has also spurred issuance.
“Sovereigns have financing needs that they feel can be partially met with relatively low sovereign yields compared to the higher local yields at this time,” said Jane Brauer, fixed income strategist at BAML.
Sovereign issuance has been pushed up by Argentina’s $16.5 billion bond that marked the country’s return to bond markets after a 15-year gap. The issue amassed orders of almost $70 billion.
Qatar’s $9 billion bond meanwhile was the biggest ever Gulf offering and orders topped $23 billion.
Russia sold Eurobond in May after three years. But big investors appear to have shunned the issue which was not cleared by the Clearstream and Euroclear settlement houses
Market turmoil following Britain’s vote to exit the European Union has halted issuance but it may resume in coming weeks as expectations grow of more stimulus from Europe and Japan.
“Given that Argentina came with a mega-deal it seems there is enough appetite within the investor community to absorb these deals. With U.S. Treasuries where they are, it’s an environment that’s conducive to more issuance,” said Anders Faergemann, senior portfolio manager at PineBridge Investments.
Investors are now awaiting Saudi Arabia’s debut bond, expected at over $15 billion.
Another potential issuer is Nigeria, which has just de-pegged the naira from the dollar, and wants to raise $1 billion.
These deals will help push full-year sovereign supply to $127.3 billion, JPMorgan predicts, versus $86 billion in 2015. The annual post-2009 average is $81 billion, it noted.
However, JPM forecasts corporate issuance at $220 billion versus $239 billion in 2014 and an annual $355 billion average between 2012-2014. (Reporting by Sujata Rao; Editing by Keith Weir)