Borrowing market nerves see lowest EM debt issuance since 2016

Borrowing market nerves see lowest EM debt issuance since 2016

NEW YORK - Government debt issuance in emerging markets was the lowest for any January since 2016, bankers have estimated, as the typically busy month faced nerves about both rising global interest rates and volatile geopolitics.

Analysts at U.S. investment bank JPMorgan calculated that $17.9 billion of EM sovereign bonds were sold last month, down about 40% from a record $32.2 billion issued last year when many EM governments looking to fill COVID spending gaps were able to borrow at all-time-low rates.

"Heightened rates and higher rates volatility remained the key hurdle for sovereigns looking to enter the market in January," JPMorgan's analysts said.

"A more hawkish FOMC last week raises the bar for new issuance even higher now," noting that Chile issued bonds immediately after the U.S. Federal Reserve's meeting, "which could suggest a greater sense of urgency to finance earlier in the year before rates rise further."

Economists now expect the U.S. central bank, which tends to drive global borrowing costs, to raise its interest rates five times before the end of year. The last time it delivered five hikes within such a short window was August 2005 to June 2006 when they went up 7 times.

The premium that international investors demand