EM nations hit pause on debt sales after record first quarter

Reuters

11-04-2025

JOHANNESBURG, April 11 (Reuters) - Turmoil in the wake of U.S. President Donald Trump's tariff hikes has abruptly stalled emerging market sovereign debt sales in April, after issuance from developing nations and companies shattered first-quarter records.
April is usually a busy month for emerging market debt sales on international capital markets, but policy uncertainty, fears of global recession and spiking U.S. yields have choked risk appetite.
No sovereign has tapped hard currency markets so far in April, according to investment research company Tellimer. This is in sharp contrast to the first quarter, where emerging market firms issued $150 billion and sovereigns $89 billion, according to calculations from JPMorgan.
While the White House this week paused for 90 days the sweeping new tariffs it had introduced on April 2, sentiment has not recovered, said analysts.
Frontier markets, or smaller, riskier economies - many of which are in Africa - have found themselves at the sharp end of recent market turmoil.
"At the moment, we should not expect any issuance at all," said Andrew Matheny, managing director of economics research at Goldman Sachs, referring to any potential eurobond sales from Africa in the short term.
"Whether countries will be able to access markets later in the year will depend on how the global economy evolves."
While total repayments on international debt from emerging markets are relatively modest this year, refinancing needs remain significant — especially for high-yield issuers.
Frontier markets have seen yields on a large share of their bonds rise above 10% by early April. That effectively shuts them out of international markets, cutting off a source of funding to plug external financing gaps.
Overall, spreads on emerging market dollar debt have widened by more than 50 basis points since February, with high-yield sovereigns seeing the steepest moves, Tellimer reported.
Analysts say hefty issuance early in the year might have been driven by front-loading, warning that subdued April activity, if prolonged, could expose weaknesses in net financing positions, especially for high-yield borrowers.
Nations that managed to get deals done since the start of the year include Romania, Ivory Coast, Morocco, Montenegro and Armenia.
Five-year issuance average for April is $52 billion, the fourth highest monthly tally, JPMorgan calculations show, but may end up falling below that this year due to the tariff uncertainty, which may lead to restrained supply.
"Prospects for the rest of the year are on hold especially given what's happening in the global context," said Aurelie Martin at asset manager Ninety One.
JPMorgan expects emerging market issuance to reach $576 billion this year, of which $323 billion would come from sovereigns - well below the COVID peak when issuance rose to $743 billion.