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Emerging Market Debt Sales Plunge Amid Ukraine War, Rising Rates

A man carries water bottles for devotees ahead of their breaking Iftar fast during the Ramadan in New Delhi, India, on Saturday, April 30, 2022. India is experiencing a heat wave, with the country’s average temperature reaching almost 92 degrees Fahrenheit (33 degrees Celsius) in March, the highest on record for the month since authorities started collecting the data in 1901. Photographer: Anindito Mukherjee/Bloomberg

Emerging-market debt sales slumped to their lowest level for the month of April in a decade as war in Ukraine and the global march higher for interest rates deterred borrowers.

Developing-nation governments and companies raised $30.6 billion of bonds in dollars or euros in April, a 48% decline from the same month a year ago, according to data compiled by Bloomberg. Issuance for the period dropped to its lowest level since 2012.

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.

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