Supersized EM sovereign debt

The market for issuance of EM debt in 2017 will be cautious in our view. If you drew up a winners and losers list from likely Trump foreign policy, Saudi Arabia would likely be on the losers list. For the moment, the Saudis are able to spend money they already have to plug any gaps and won’t want to issue into weak demand.

Issuers will be in a wait-and-see mode and probably only the very desperate will issue early in 2017. Should things prove to be not as bad as anticipated then there may be a rush for issuance later in the year.

From what we can estimate from economic policy it will likely be inflationary, we can see this from the sell-off in US Treasuries. That is only going to push yields higher in EM debt, thus increasing the cost of borrowing and issuance.

 Carl Shepherd – Newton, a BNY Mellon company

To read more about expectations for 2017 read our market outlook

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