Record-Breaking Issuance Driven by Market Uncertainty and Investor Appetite
Emerging market (EM) governments and corporations have issued $331 billion in hard-currency bonds (denominated in USD, EUR, etc.) so far in 2025, marking the fastest pace in four years and surpassing the total issuance volume for the first half of 2024. This surge reflects borrowers rushing to secure financing before potential global market volatility, while yield-seeking investors drive strong demand.
Key Drivers of the Issuance Boom
Dollar Weakness and Shift Away from USD Dominance
Growing skepticism about the U.S. market’s long-term dominance has weakened the dollar, boosting international asset prices.
Analysts at Bank of America and JPMorgan predict emerging market assets will benefit from dollar depreciation, while Société Générale notes that local-currency EM assets are entering a “golden age.”
Narrowing Spreads and Persistent Demand
The extra yield investors demand for holding EM dollar bonds over U.S. Treasuries has fallen to near 2020 lows, despite tightening U.S. market spreads.
Bahrain-based Investec’s emerging market debt head, Omotunde Lawal, notes CFOs are acting now to avoid higher U.S. bond yields if fiscal concerns persist.
U.S. Economic Uncertainty Accelerates Borrowing
JPMorgan’s London-based EMEA debt capital markets head, Stephen Weller, says borrowers fear worsening market turbulence due to opaque U.S. economic data.
With JPMorgan estimating a 40% chance of a U.S. recession, issuers are prioritizing access to capital now to hedge against potential spread widening.
Regional Highlights and Sector Trends
Latin America’s Strong Return to Markets
After underperformance in offshore markets, Latin American firms (e.g., Brazil, Peru, Argentina telecoms) are rebounding, with Citigroup’s Adrian Guzoni predicting full-year issuance will exceed 2024 levels.
Debut and High-Yield Issuances
Kyrgyzstan launched its first international bond (700million,5−year,82.1 billion in demand**.
Vietnam and Chile’s economic reforms have further supported regional issuance.
Selective Participation Among Frontier Markets
High-yield issuers face challenges due to rising U.S. Treasury yields, trade uncertainty, and oil price declines, limiting access for low-rated frontier economies (per T. Rowe Price’s Sammy Moudi).
Morgan Stanley expects Poland, Romania, Kuwait, and Kazakhstan to issue soon, while M&G Investments’ Claudia Calich highlights potential deals from Costa Rica and Guatemala.
Market Implications and Outlook
Dollar weakness and investor appetite are creating a favorable window for EM borrowers, but geopolitical and economic risks remain.
Frontier markets with weaker credit profiles may struggle to capitalize on the trend, exacerbating EM differentiation.
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