President Vladimir Putin eclipsed what was the fastest start to the year for emerging-market bond sales as the standoff between Russia and the U.S. over Ukraine deterred borrowers from offering debt.

Bond sales in developing countries fell 23 percent to $244 billion in the first quarter through yesterday, even after the busiest start of a year on record. Average borrowing costs for emerging-market issuers rose 18 basis points this month to 5.28 percent on March 25, after sliding to the lowest since November on Feb. 28, according to the Bloomberg USD Emerging Market Composite Bond Index.

“The fear of an escalation in Ukraine really made the market very nervous,” Michael Ganske, the head of emerging markets at Rogge Global Partners Plc in London, said by phone on March 20. “It’s just a more difficult capital market for emerging-market borrowers compared to a year ago.”

Bonds, stocks and currencies across the developing world suffered losses this month as Russia annexed Ukraine’s Crimea peninsula, prompting the U.S. and the European Union to freeze some Russian assets and slap travel bans on select individuals. The ruble and government bonds plunged to records, the Finance Ministry canceled local debt auctions and borrowers including OAO Sberbank, the nation’s largest lender, sought financing through loans or private placements rather than Eurobonds.

Slower Sales

While Russian assets have recovered in the past week as concern waned that the U.S. and Europe will level stricter economic sanctions, the worst regional crisis since the Cold War pummeled quarterly bond sales. Russian offerings slumped 65 percent in the period, while sales in eastern Europe, the Middle East and Africa dropped 35 percent and those in Latin America increased 20 percent.

In the first three weeks of 2014, borrowers including Poland, Mexico, Indonesia and Turkey sold $84 billion of bonds, up 23 percent from the year-earlier period and the most since Bloomberg began tracking the data in 1999. Mounting tensions in Ukraine and slowing growth in China, where a local solar-cell maker defaulted on bonds in early March, contributed to the 35 percent drop in March sales to a three-year low of $82 billion.

“Many firms who wanted to issue, issued already,” Peter Varga, who manages $650 million in emerging-market corporate bonds at Erste Sparinvest in Vienna, said by e-mail on March 19. “Those who are more picky, will not issue in a market of fear. They can wait for better levels.”

Debt sales in China fell 10 percent to 948 billion yuan ($153 billion) this year from the first three months of 2013.

‘Wild Card’

Eastern European bond sales started to pick up in the latter half of March after Putin said he wasn’t seeking to split Ukraine. Hungary sold $3 billion of dollar-denominated securities on March 18. Slovenia started investor meetings this week before a possible sale of as much as 1.5 billion euros ($2.1 billion) of bonds, according to two people who attended the meetings in London on March 25. Sales in Latin America jumped 77 percent this month.

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