With higher U.S. borrowing costs, it’s more expensive for emerging markets to refinance their $3.3 trillion dollar debt, threatening to increase default rates and suppress economic growth.
Lending is starting to dry up. Issuance by emerging-market borrowers slumped 98 percent to a net $1.5 billion in the third quarter, from the second quarter, according to the BIS.
“The challenge will be higher for quasi-sovereign and corporate issuers that have to roll over debt as their funding costs will be substantially higher,” said Greg Saichin, the chief investment officer for emerging-market fixed-income at Allianz Global Investors Europe GmbH, by e-mail.