Developing nations’ debt costs soar

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Oct 23 : Developing nations' borrowing costs jumped to the highest in six years and as Belarus joined governments seeking a bailout from the International Monetary Fund to help weather the credit crisis and slump in commodities.

The extra yield investors demand to own emerging-market government bonds instead of US Treasuries rose 25 basis points to 8.27 percentage points, the most since November 2002, according to JPMorgan Chase & Co.'s EMBI+ index. The annual cost to protect Russia's bonds from default soared 1.3 percentage points to 10.8 % of the debt insured, the highest in at least eight years, according to CMA Datavision.

"There is now no safe haven globally other than a deeply indebted US government,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. "The events of the last few days are categorical evidence of the globalization of the credit crunch and its subsequent problems.'' Ex-Soviet Belarus followed Iceland, Pakistan, Hungary and Ukraine in requesting emergency loans as the global financial crisis limits its ability to borrow, the IMF said on Wednesday. Argentina's lawmakers are attempting to stop President Cristina Fernandez de Kirchner, seizing pension funds from money managers, as the country risks defaulting for the second time this decade.

Emerging-market stocks, bonds and currencies are getting battered as the financial crisis that began with US mortgages last year pushes the global economy toward a recession, crimping the demand for the commodities that sustain most developing nations' finances. The IMF forecast global growth will slow to 3 % in 2009, from 3.9 % this year, signaling a global recession. Stocks in emerging markets have tumbled 59 % this year, compared with 43 % for developed countries, according to MSCI Indexes.

Belarus applied for a $2 billion loan and may also seek funds from central banks and commercial banks in other countries, news agency Interfax reported yesterday, citing the Belarusian central bank.