Emerging market issuers have been busy this year, but investors aren’t getting much of a return, as rising Treasury yields steal their lunch.
Joyce Chang, head of emerging markets research at JP Morgan, told the Emerging Market Traders’ Association yesterday that:
Returns are lacklustre, barely breaking positive territory.
This despite the fact that there has been $62 billion in emerging market issuance in the first two months of the year, compared with last year’s record totals of $333 billion.
The problem is that improving U.S. growth prospects and expectations that the Federal Reserve will take the brake off the money-printing pedal have improved the investment and yield appeal of developed world assets.
As Chang said:
It seems the Ben Bernanke plan is working.
Ten-year Treasury yields have risen as much as 40 basis points this year, breaching 2 percent last month. Emerging sovereign debt spreads have widened 30 bps in that time. High-yield issuers have been out in force as result, with emerging market high yield issuance of $26 billion this year already close to full-2012 levels, according to Chang.