Solid Demand
For emerging-market governments in need of financing, there’s an added bonus to increased demand for local assets.
With global monetary conditions still tight, borrowers and investors have turned to alternative sources of funding, such as loan syndication, conservation-linked securities and, of course, local-currency bonds.
The finance minister in Peru, for instance, has said the nation is eager to raise longer-dated, local currency-debt and using the proceeds to pay down some of the nation’s outstanding overseas notes.
And corporate activity has been rampant in Mexico’s domestic bond market—a trend that’s set to spill into 2024, according to Banco Santander SA. Lira-denominated Turkish government bonds, meanwhile, have been rallying, fueled in part by an increase in offshore buying.
“I think it’s healthier to rely on its local investor base and in a currency that is under your control,” said Vontobel’s Larose.
In all, emerging-market governments and companies have sold some $1.5 trillion worth of domestic debt so far this year, a 4% increase compared to the same period of 2022, according to data compiled by Bloomberg.
Issuance was led by Chinese, South Korean and Indian borrowers, the data show, though Brazil, Russia, Thailand and Saudi Arabia also ranked among the most-active local primary markets.
“There are windows of opportunity in local-currency sovereign issuance,” Itau’s Navarro said. “The sovereign issuers are going to lead the market at least for the first half of 2024.”
What To Watch
• Across Wall Street, traders will watch as the Fed, European Central Bank and Bank of England make policy announcements in the coming week.
• Investors will closely watch for any major announcements on what comes next for Argentina after Javier Milei is officially sworn in as president on Dec. 10.
• In Brazil, the central bank will hold its final monetary policy meeting of the year. There’s broad consensus on a 50-basis-point rate cut to 11.75%.
• Bloomberg Economics expects Mexico’s policymakers to hold the benchmark rate at 11.25% at their December meeting and keep a cautious tone. They see Peru’s central bank cutting the policy rate to 6.75%.
• The Bank of Russia may hike the policy rate by 100 basis points to 16% on Dec. 15, according to Bloomberg Economics.
• Central bank meetings in Pakistan and the Philippines will probably result in decisions to keep rates unchanged.
• Inflation data is set to come out from Brazil, Argentina, South Africa, India and China.
This article was provided by Bloomberg News.