Companies and governments in emerging Europe, the Middle East and Africa, are on course to raise a record from bond sales this year as some borrowers that had been priced out returned.
The total, which JPMorgan estimates could hit $300 billion, is a salve to countries like Turkey and Ivory Coast, where domestic policy changes and shifting market costs, respectively, enabled them to tap markets fully.
BNP Paribas calculates year-to-date bond sales for the region at $253 billion, closing in on the $261 billion annual record hit in 2020. That year, governments and companies had turned to bonds to help fund spending to offset the economic toll of the COVID-19 pandemic.
Alexis Taffin de Tilques, head of Debt Capital Markets CEEMEA, at BNP Paribas, said the market was in “incredible shape”.
“The primary market has been like a bulldozer. It didn’t really care about whether markets were good or bad - just went on and on and on,” he added.
Stefan Weiler, head of CEEMEA debt at JPMorgan, said he expected the total to reach $275-to-$300 billion.
While Gulf nations, including Saudi Arabia and Abu Dhabi, accounted for more than half of the issuance, Turkey’s total is already at a record of $27 billion, approaching double last year’s $18 billion.
Investor demand for the country’s bonds spiked after the government returned to orthodox economic policies last year - gaining it credit rating upgrades from all three major agencies.
Taffin de Tilques said the issuance was beginning to tail off this year, but next year could resurge if the U.S. Fed and other central banks keep cutting rates as expected.
“The cost of money is going to be more attractive, which will incite people, especially the high-yield names, to go back to the market in quantum,” he said.
Oil prices falling below $70 per barrel could drive more Gulf issuance, especially from Saudi Arabia, which relies heavily on crude for its budget.
Weiler also said countries that are perceived as riskier, such as Angola and Nigeria, which did not issue bonds this year, could return to the market if yields continue to fall.
“Sub-Saharan Africa could be the story next year,” Weiler said.
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