Posted inEmerging MarketsFixed Income

Emerging market debt – time to look for the exit?

In a recent report, the Institute of International Finance (IIF) noted that emerging market debt has increased by $39trn since 2006, accounting for more than half of the global increase in debt over the period. It also said refinancing risk is high, with $1.1trn of emerging market bonds and syndicated loans coming due by the end of this year.

EM debt bubble?

Though developed markets still count for the lion’s share of global debt, the IIF believes “the overall EM debt burden is a growing source of concern”. Especially countries that have a “debt-driven growth model”, such as Turkey, South Africa and China, are deemed vulnerable.













Emerging market debt issuance has doubled over the last two years, and is now almost at par with issuance in developed markets. While such a fast-growing asset class brings plentiful opportunities to investors, it should be kept in mind that such growth also comes with increased risks.

As you can see on the graph, the recent growth in emerging market debt issuance shows a striking resemblance with what happened in Western debt markets between 2003 and 2007……

Part of the Bonhill Group.