Emerging market borrowers raised a record $181 billion in global bond markets during the first quarter of 2017, with both corporate and sovereign tallies surpassing previous highs, data from JPMorgan showed. The bank, which runs the most widely used emerging debt indexes, said in a note sent late on Monday that sovereign year-to-date issuance stood at $61.5 billion, over $16 billion more than at this time of the year in the past.
Emerging market companies raised $119.1 billion, surpassing the previous high of $109.6 billion set in the first quarter of 2013, JPM said. The $51 billion sold in March was more than twice the $21.8 billion from a year back, and well above the average March supply of $28.4 billion. The numbers testify to the global fundraising rush before the U.S. Federal Reserve kicked off interest rate rises, precipitating a rise in U.S. Treasury yields.
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In a report released on Monday, the Institute for International Finance found that outstanding emerging market debt had seen a “spectacular rise” to $55 trillion in 2016, equal to 215 percent of the GDP of developing nations, which was mostly by non-financial corporate debt. JPM said appetite for emerging new debt was being supported by abundant cash flows to bondholders in the form of coupon payments and maturities that it estimated at $26.5 billion so far this year for sovereigns and $72 billion for corporates.
Emerging debt funds are also receiving inflows from investors, having just taken new money for nine weeks in a row. JPM forecasts sovereign bond issuance at $137 billion in 2017 and corporate sales at $315 billion but added that the current issuance rate would pose “upside risk” to the forecasts, at least on the corporate front.
(Reporting by Sujata Rao; Editing by Tom Heneghan)