Faced with the impact on sentiment of the intensifying conflict in Ukraine and central banks turning more hawkish as they try to bring inflation to heel, developing-market borrowers have become more skittish.

The average yield on dollar debt exceeded 6.3% on May 2 to hit the highest level in two years, making borrowing prohibitively expensive for junk-rated issuers from emerging markets. During the month, Istanbul’s municipal administration borrowed at a coupon rate of 10.75% for its $305 million issue, while Kenya said it may scrap a plan to sell $1 billion of Eurobonds by the end of June because of the jump in yields.

Meanwhile, global emerging-market debt funds suffered their largest outflow since April 2020 in the week ending April 27, with investors pulling almost $4 billion, according to a Bank of America Merrill Lynch report last week, citing EPFR Global data. Outflows in the year to date reached $18.7 billion, the data showed.