Latest news with #sovereigndebt
Zawya
29-05-2025
- Business
- Zawya
Global government issuance of US dollar debt tumbling in 2025, data shows
Governments in Asia and Europe are raising far less debt in U.S. dollars than usual, preferring to issue at home as they avoid exposure to rising U.S. yields, currency volatility and broader concerns about U.S. government finances. According to Dealogic data, issuance of dollar bonds by non-U.S. sovereigns dropped 19% to $86.2 billion in the first five months of this year compared with the same period last year, marking the first decline in three years. The January-May dollar bond issuance by the governments of Canada and Saudi Arabia fell 31% and 29% to $10.9 billion and $11.9 billion, respectively, while issuance by Israel and Poland declined 37% and 31% to $4.9 billion and $5.4 billion. At the same time, Dealogic data showed global sovereigns' local currency bond issuance had climbed to a five-year high of $326 billion so far this year. This drop in dollar bond issuance comes at a time when global investors are pulling back from U.S. assets, partly in response to tariffs and as they question U.S. financial dominance and safety. Johnny Chen, portfolio manager at William Blair's emerging markets debt team, said the rise in local currency issuance is largely driven by falling domestic interest rates as inflationary pressures ebb, noting that India, Indonesia and Thailand have all cut their benchmark interest rates this year. "In India's case, the local currency debt market has also matured further with the inclusion of Indian local currency debt in global bond indices. This development has likely expanded the investor base, prompting more local currency issuance in 2025," he said. Brazil is considering issuing its first sovereign bonds in yuan, two government sources said, after President Luiz Inacio Lula da Silva's visit to Beijing concluded with a wave of Chinese investment announcements and a currency swap agreement. Brazil's sovereign U.S. dollar bond issuance has dropped 44% to $2.4 billion this year, data showed. Saudi Arabia raised 2.25 billion euros ($2.36 billion) through a euro-denominated bond sale, including its first tranche of so-called green bonds, as part of its global medium-term note program, aligning with its strategy to diversify away from dollar-linked financing. "The challenge with the onshore local currency is that those issuances tend to be much smaller, they're less liquid," said Kenneth Orchard, head of international fixed income at T. Rowe Price, based in London. "But we think over time there are going to be more international investors in those markets." (Reporting By Patturaja Murugaboopathy in Bengaluru and Jiaxing Li in Hong Kong; Additional reporting by Gaurav Dogra in Bengaluru; Editing by Hugh Lawson)
Reuters
29-05-2025
- Business
- Reuters
Global government issuance of US dollar debt tumbling in 2025, data shows
May 29 (Reuters) - Governments in Asia and Europe are raising far less debt in U.S. dollars than usual, preferring to issue at home as they avoid exposure to rising U.S. yields, currency volatility and broader concerns about U.S. government finances. According to Dealogic data, issuance of dollar bonds by non-U.S. sovereigns dropped 19% to $86.2 billion in the first five months of this year compared with the same period last year, marking the first decline in three years. The January-May dollar bond issuance by the governments of Canada and Saudi Arabia fell 31% and 29% to $10.9 billion and $11.9 billion, respectively, while issuance by Israel and Poland declined 37% and 31% to $4.9 billion and $5.4 billion. At the same time, Dealogic data showed global sovereigns' local currency bond issuance had climbed to a five-year high of $326 billion so far this year. This drop in dollar bond issuance comes at a time when global investors are pulling back from U.S. assets, partly in response to tariffs and as they question U.S. financial dominance and safety. Johnny Chen, portfolio manager at William Blair's emerging markets debt team, said the rise in local currency issuance is largely driven by falling domestic interest rates as inflationary pressures ebb, noting that India, Indonesia and Thailand have all cut their benchmark interest rates this year. "In India's case, the local currency debt market has also matured further with the inclusion of Indian local currency debt in global bond indices. This development has likely expanded the investor base, prompting more local currency issuance in 2025," he said. Brazil is considering issuing its first sovereign bonds in yuan, two government sources said, after President Luiz Inacio Lula da Silva's visit to Beijing concluded with a wave of Chinese investment announcements and a currency swap agreement. Brazil's sovereign U.S. dollar bond issuance has dropped 44% to $2.4 billion this year, data showed. Saudi Arabia raised 2.25 billion euros ($2.36 billion) through a euro-denominated bond sale, including its first tranche of so-called green bonds, as part of its global medium-term note program, aligning with its strategy to diversify away from dollar-linked financing. "The challenge with the onshore local currency is that those issuances tend to be much smaller, they're less liquid," said Kenneth Orchard, head of international fixed income at T. Rowe Price, based in London. "But we think over time there are going to be more international investors in those markets."
Zawya
23-05-2025
- Business
- Zawya
Turkey comes back with more sevens: IFR
Turkey raised US$2bn in its second bond outing of the year on Wednesday, which was a similar deal to its first transaction three months ago. The sovereign had long been expected to return to the primary arena, given it has about US$11bn to raise in international markets this year. But it was delayed for various reasons – the arrest of the Istanbul mayor, then the US tariffs and even the regional development bank annual meetings. Ironically, given the relatively more supportive backdrop of the past couple of weeks, the deal came on a much tougher day, with US rates selling off again because of president Donald Trump's push for tax cuts despite rising debts, and also a weak 20-year Treasury auction. "[Turkey] navigated a tricky market backdrop, with the seven-year Treasury up 9bp on the day," said a banker. The sovereign printed a 7.25% May 2032 trade at a yield of 7.45% from IPTs of the 7.75% area. The best reference point was the bond it priced earlier this year, a US$2.5bn 7.125% February 2032 note. It was bid at around 7.30%, according to LSEG, just after books opened. Given the volatility, however, the leads said the premium was about 7bp by the end. The decision to go with the same seven-year tenor was down to the cost of funding, said the banker. An investor said after IPTs had been announced, he saw 40bp–45bp of new issuance premium, though he expected pricing to be compressed "given the seven-year point is likely attracting local demand". He said Turkey has traded "relatively well" through the tariffs-inspired volatility and with its five-year CDS trading sub-300bp. The performance of the February 2032s shows how much of a swing there has been in asset prices, with the bond trading as low as 7.06% at the close on March 18 and as high as 7.91% at the April 9 close, according to LSEG. About 140 accounts were in the new issue. UK investors were the biggest buyers with 38%, the US took 30%, Turkey 15%, other Europe 13% and others 4%. The deal came a day before the central bank left its year-end inflation forecast unchanged at 24%, but governor Fatih Karahan said it is ready to tighten policy if inflation worsens, after having pivoted to raising interest rates last month, reported Reuters. Turkey is rated B1 positive by Moody's and BB– stable by Fitch. Bank of America, BNP Paribas, HSBC and Morgan Stanley were the lead managers.
Reuters
09-05-2025
- Business
- Reuters
Policy uncertainty fuels rise in U.S. government debt hedging
NEW YORK, May 9 (Reuters) - The cost of insuring exposure to U.S. government debt has climbed noticeably over the past month and remains stubbornly high, as jittery investors brace for a looming U.S. borrowing-limit political debate as well as overall policy uncertainty. Spreads on U.S. credit default swaps (CDS) - market-based gauges of the risk of a sovereign default - widened to their highest since the debt ceiling crisis of 2023 in recent weeks. The size of the market and trading volumes have also increased recently, Barclays said in a note this week, in a sign that a product generally considered to be niche is garnering more investor attention. While years ago buying protection for a U.S. default was an unpopular trade, things have changed recently because of policy uncertainty in Washington, said Greg Peters, co-chief investment officer of PGIM Fixed Income. "Now, with the debt ceiling and everything else going on, no one wants to be short that option," he said. U.S. sovereign CDS spreads have increased not just for short-dated maturities but across the curve, with one-year and five-year spreads at their highest since May 2023, when the U.S. was on the verge of a default because of political brinkmanship over the debt ceiling. On Friday, those spreads stood at 60 basis points and 56 basis points, respectively - a touch lower than in recent weeks but still significantly higher than in March, S&P Global Market Intelligence data showed. The rise in the protection costs has gained momentum after April 2, when U.S. President Donald Trump announced sweeping tariffs, which in the following days sparked a sharp selloff in the Treasury market, the bedrock of the global financial system. "What you've seen since April 2 is a real rise in that risk premium," said Peters. After days of heavy selling, Treasuries rallied after Trump announced a 90-day tariff pause for most U.S. trading partners, a move likely prompted by the tariff-fueled selloff. Benchmark 10-year yields were last at 4.36%, about 20 basis points lower than the high they touched on April 11, the day tariffs were paused. Still, another key measure of risk embedded in Treasury bonds, which captures the premium investors charge for policy uncertainty, has remained elevated in recent weeks, according to New York Fed data. The U.S. government reached its statutory borrowing limit in January and began employing "extraordinary measures" to keep it from breaching the cap and risking a potential default. Barclays analysts said in a note this week the so-called X-date, when the government will no longer be able to pay all its obligations, will likely fall in late August or early September, but that an economic slowdown could put pressure on the Treasury's cash position and pull that date forward. Treasury Secretary Scott Bessent said earlier this week that the department was "at the warning track" in terms of exhausting remaining borrowing capacity under the federal debt ceiling, but vowed that the government would not default on its obligations. Investors held about $3.9 billion worth of active credit insurance contracts on U.S. government debt as of May 2, Barclays said, citing data from the Depository Trust and Clearing Corporation, a financial market infrastructure company, up from $2.9 billion at the beginning of the year. Over the past three months, credit insurance on U.S. government debt has been the 12th most-traded single-name CDS contract globally, with weekly trading averaging over $625 million, said Barclays.
