Emerging bonds: crawling out of the woodwork

May 12, 2010

Now that markets appear to have decided that a $1 trillion stabilisation package from the European Union is enough to soothe global nerves and ward off a sovereign debt crisis, emerging market sovereigns and corporates may start to issue bonds again.

Emerging market debt issuance was heading for a bumper year — at more than $100 billion issued so far — before investors started to fear an imminent default by Greece and markets froze up.  

But a return this week in emerging sovereign debt spreads below the psychologically key threshold of 300 basis points over U.S. Treasuries is likely to encourage issuers back again.

Kazakh uranium producer Kaztomprom is expected to price a Eurobond totalling around $500 million this week. Kazakh borrowers were unable to issue debt last year due to the restructuring of several of the country’s banks, but state oil firm Kazmunaigaz raised $1.5 billion last month.

Investors have also been nervous about Gulf borrowers, following last year’s shock standstill on debt payments by state-owned Dubai World. However, Qatari Diar, the property arm of Qatar’s sovereign wealth fund, is also planning a bond.

Next door to Greece itself, Albania says it plans to issue a delayed debut Eurobond by the end of next week. However, long-time defaulter Argentina is not so sure. The country is in the process of swapping outstanding defaulted debt but economy minister Amado Boudou said this week he may scrap plans for a new $1 billion bond due to market uncertainty, adding that Argentina “doesn’t need the money”.

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