America first stalls bond issuance bonanza in EMs
high Treasury rates hamper weaker credits from tapping international capital.
While a recent surge in US bond yields has abated for now, investors fear the upward moves will resume after President-elect Donald Trump takes office on Monday, given his support for trade-tariff hikes and mass deportations, policies that are considered inflationary.
With that in mind, several EM sovereigns rushed to market as soon as 2025 got underway, taking the year-to-date tally of Eurobond sales to about $34 billion, up 12% from the same 2024 period. However, seven of this year's eight bond issuers have investment-grade credit ratings, including Saudi Arabia, Mexico and Slovenia. The exception is Benin, which managed to place a $500 million bond on Thursday.
The trend favoring better-quality credits holds among EM corporates and government-linked borrowers too. Debt sales from junk-rated borrowers — those with scores below BBB-/Baa3 from the main ratings companies — amount to some $6 billion so far in 2025, down 7% from year-ago levels and the slowest start to a year since 2020, data compiled by Bloomberg show. And on Friday, Bahrain's Arab Banking Corp. was forced to pull its issue after investors found the yield too low to stomach.
«Emerging markets are adjusting to the no-landing hypothesis of a stronger US economy, higher rates and sticky inflation,» said Mohammed Elmi, senior portfolio manager at Federated Hermes. «With an 'America First' policy mix to come from the new administration, it could exacerbate the rate selloff
