JPMorgan Chase anticipates that despite potential market disruptions from the upcoming U.S. presidential election and heightened tensions in the Middle East, bond issuance in the emerging markets of Europe, the Middle East, and Africa (EMEA, Financial) is projected to reach a historic peak this year. Currently, EMEA's emerging market bond issuance has reached $253 billion for 2024. The prediction is to surpass the previous record of $265 billion set in 2020.
Stefan Weiler, JPMorgan's EMEA Debt Capital Markets head, mentioned that given the current trend, EMEA's bond issuance is on track to set a new high by year-end. Concerns over the U.S. election have prompted issuers to finalize transactions ahead of potential fluctuations in U.S. Treasury yields and borrowing costs for developing markets.
This year, global bond issuance from governments and corporations has surged by 59% to a total of $507 billion, with approximately half coming from the EMEA region, dominated by countries such as Saudi Arabia, Poland, Romania, and Turkey. The successful completion of debt restructurings in Ukraine, Zambia, and Suriname, along with ongoing efforts in Ghana and Sri Lanka, has bolstered demand for high-yield bonds as these nations emerge from a wave of sovereign defaults. The Maldives also avoided potential bond defaults by extending currency swap agreements with India, enhancing its foreign exchange access.
Weiler noted a strong appetite for high-beta bonds, driven by investors seeking to secure high yields. This demand is fueling a robust market for initial bond offerings, with many issuers able to price at fair value due to substantial oversubscriptions.
Investor interest in Turkey is notably high as the country's economic stabilization has improved sentiment. In September, Fitch Ratings upgraded Turkey’s credit rating for the second time in six months, citing strengthening foreign reserves and improved external buffers. Weiler pointed out Turkey's prominence this year, with several corporate borrowers successfully entering the international debt markets for the first time.
Demand for emerging market bonds is not limited to specialized funds but also includes other investors whose risk perception has improved. As U.S. rates rise, some funds had exited emerging markets but are now returning as lower U.S. rates make emerging market yields more attractive. JPMorgan remains optimistic about demand continuing into 2025, supported by a lower interest rate trajectory.
