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Emerging and Frontier Markets Issuance Monitor

MONETARY AND CAPITAL MARKETS DEPARTMENT June Highlights: July 7, 2021

• Sovereign issuance in June rebounded to its strongest month since January, at close to $20 bn, after slumping to $7.3 bn in May. Issuers took advantage of stronger risk appetite and attractive borrowing costs, with the US 10-year yield falling close to 20 bps from the mid-May peak to under 1.5% by end June. • IG sovereign issuance reached just $8 bn, led by Indonesia ($3 bn), Philippines ($3 bn), and Panama ($2.1 bn), with Indonesia delivering a 30-year $0.8 bn green sukuk. • HY sovereign issuance accelerated significantly in the last week of June for the largest weekly volume since mid- January after low levels of activity in the previous months. All variety of high yield sovereigns came to market, from larger EMs such as Turkey ($4.3 bn) and Brazil ($2.2 bn), to frontiers, including: Cameroon ($0.8 bn), ($1 bn), Mongolia ($1 bn), ($1.75 bn), and ($0.9 bn). • Corporate issuance hit a record high at $48 bn in June, bolstered by Petroleum ($12.5 bn) and Saudi Aramco ($6 bn). At $175 bn, corporate is well above the previous YTD record of $140 bn in 2019. Chinese issuance of $9.5 bn left the 2021 YTD total just below the 2020 pace, and well below the 2019 record. In contrast, corporate ex. China issuance is up nearly $40 bn compared to 2020. • Near term outlook favorable. Attractive borrowing costs should support further opportunistic issuance from sovereigns. However, with IG issuance already tracking $25 bn behind last year’s record breaking pace, full year issuance will likely fall below 2020. Additionally, elevated oil prices and the SDR allocation in the second half of the year are expected to ease bond issuance needs. Nevertheless, strong momentum is expected to continue in the coming weeks, with , , likely in the HY segment according to analysts. So far in July, , Mexico and Sharjah have already come to the market. • spreads widened slightly, with frontiers underperforming, despite considerable differentiation. Spreads widened for two-thirds of emerging and frontier issuers, though most moves were small. Frontier spreads moved 25 bps higher, led by El Salvador (+141 bps) as well as distressed issuers such as Suriname, , and . • EM bond fund inflows remain moderate but picked up in June, led by stronger hard currency flows. YTD flows continue to inch up, topping $30 bn (hard, local, and blended), though returns remain negative. June 2021 Overview Total hard currency issuance is on a record pace at $219 Emerging market credit spreads widened modestly in bn YTD, compared to $197 bn in 2020, led by corporates June, with frontier spreads underperforming Chart 1. Cumulative Sovereign and Corporate Issuance Chart 2. Emerging and Frontier Market Spreads (USD billions, excluding China) (Basis points) 350 COVID-19 Peak Emerging Markets 1 month 2020 1,200 1,100 Frontier Markets Emerging Markets IG 1,062 300 2017 US Corp HY 2019 1,000 250 2016 800 2018 721 200 531 2021 556 600 150

333 100 400 401 340

50 200 296 268

147 150 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mar.20 Jun.20 Sep.20 Dec.20 Mar.21 Jun.21

This monitor is produced by MCMGA. It captures international issuance, not hard or local currency issuance in local law. Sources: Bloomberg, Bond Radar (issuance), EPFR (fund flows), JPMorgan (spreads), analyst reports, and IMF Staff.

Issuance Detail: Emering Market Corporates and Sovereigns Corporate issuance is far outpacing 2020, up close to Sovereign rebounded in June to $20 bn, led by SE Asia 25% y/y, while sovereign is down about $15 bn YTD (Indonesia, Philippines), while three SSA sovereigns from 2020. issued (Senegal, Cameroon, Kenya). Chart 3. Pace of Sovereign and Corporate Issuance Chart 4. EM Sovereign Hard Currency Issuance by Region (USD billions) (USD billions)

YTD Sov Rest of year Sov YTD Corp Rest of year Corp SE Asia SSA 300 40 Europe MENA 240 LAC 12m issuance pace (rs) 226 250 35 214 220 203 30 212 199 200 200 191 189 191 185 187 186 25 178 150 186 180 20 100 160 15 50 140 10

0

5 120

Sov

Sov

Sov

Sov

Sov

Sov

Sov

Sov

Corp

Corp

Corp

Corp

Corp

Corp Corp Corp 0 100 2014 15 16 17 18 19 20 21 Jun.20 Aug.20 Oct.20 Dec.20 Feb.21 Apr.21 Jun.21

EM corporate issuance surged to $48 bn in June, led by SOE issuance volumes were massive in June, led by MENA SOEs ($18.4 bn), China ($9 bn), and Brazil ($6.6 Qatar Petroleum ($12.4 bn), and Saudi Aramco ($6 bn). bn). Chart 5. Corporate Hard Currency Issuance by Region Chart 6. SOE Hard Currency Issuance by Region (USD billions) (USD billions) SE Asia (ex China) SSA 25 SE Asia (ex China) SSA 80 50 Europe MENA 190 Europe MENA LAC China 182 LAC Pemex 12m issuance pace ex China (rs) China 12m issuance pace (rs) 175 20 70 40

159 157 160 153 15 60 30 144 143 140 139 140 145 135 132 10 50 20 130 131 130

10 5 40 115

0 100 0 30 Jun.20 Aug.20 Oct.20 Dec.20 Feb.21 Apr.21 Jun.21 Jun.20 Aug.20 Oct.20 Dec.20 Feb.21 Apr.21 Jun.21

Notes: Europe includes Central Asia. LAC=Latin America and the Caribbean; LAC excludes Pemex in Chart 6. SSA = Sub Saharan African Region. SE Asia=Southeast Asia

2 Issuance Detail by Rating High yield sovereign issuers returned to market after Investment grade issuers led the way for corporates, being shut out in May, accounting for 60% ($12 bn) of bolstered by MENA energy producers. However, HY June supply. corporates also had their best month since January. Chart 7. Sovereign Hard Currency Issuance by Rating Chart 8. Corporate Hard Currency Issuance by Rating (USD billions) (USD billions)

A or above BBB BB B NR Share of HY issuance (3m, right scale) 40 50% 50 NR CCC or below 60% B BB BBB A or above 45% 45 35 Share of HY issuance last 3 months(rs) 50% 40% 40 30 35 35% 40% 25 30% 30

20 25% 25 30%

20% 20 15 20% 15% 15 10 10 10% 10% 5 5% 5 0 0% 0 0% Jul.20 Sep.20 Nov.20 Feb.21 Apr.21 Jun.21 Jun.20 Aug.20 Oct.20 Dec.20 Feb.21 Apr.21 Jun.21

Issuance Detail of Frontier Economies Frontiers returned in June, with three SSA sovereigns Frontiers have reduced the average maturity in 2021, in and Mongolia issuing, bringing total frontier issuance to contrast with the rest of the EMs. $19.8 bn in 2021. Chart 9. Frontier Sovereign Issuance by Rating Chart 10. Average Maturity Profile of New Issuances: Frontiers vs (USD billions) EMs ex Frontiers (Number of years)

8 Europe & Central South & SE Asia MENA SSA LAC Asia Frontier EM 20 7 Armenia (BB-)

6 (B+) 18 Maldives (CCC+) 5 Paraguay (BB+) 16 Mongolia (B) 4 Pakistan (B-) Egypt (B) Benin (B+) 14 Egypt (B) Cameroon (B) 3 Armenia (BB-) (B+) Uzbekistan (BB-) Senegal (BB-) 12 Dominican Republic 2 Dominican Republic Bahamas, (BB-) Honduras (BB-) (BB-) The (BB) Ghana (B-) Mongolia (B) 10 Dominican Republic 1 El Salvador (B-) (BB-) Maldives (CCC+) Belarus (B) Côte d'Ivoire (BB-) Côte d'Ivoire (BB-) Kenya (B) Bahamas, The (BB) Georgia (BB) 8 0 Jun.20 Aug.20 Oct.20 Dec.20 Feb.21 Apr.21 Jun.21 2014 2015 2016 2017 2018 2019 2020 2021

3 Flows: EM Debt Dedicated Funds Bond fund inflows accelerated in June… …driving YTD flows close to $10 bn for both hard and local currency, though returns remain soft, with local currency underperforming. Chart 11. Bond Fund Flows Chart 12. Weekly Fund Flows Year to Date and Returns (USD billions) (Jan 1, 2021 = 0; USD billions, left scale; percent, right scale) 20 Hard Currency Local Currency Blend Total Bond Flows 15 10

10 8

6 15 5 4 0 2 10 Hard currency fund flows -5 Local currency fund flows 0 Hard currency returns (rs) -10 Local currency returns (rs) -2 5 -15 -4 -20 -6 0 -25 -8

-30 -10

-5

Apr.21

Jan.21

Jun.21

Mar.21 Feb.21 May.21

Spreads on Hard Currency Bonds Among non-distressed issuers, El Salvador spreads The number of distressed issuers declined to 8 in June, widened by over 100 bps following news of bitcoin with Grenada spreads dropping below 1000 bps. adoption Chart 13. Major Laggards and Gainers Last Month on Credit spreads Chart 14. Number of Distressed Issuers (Basis points; change in during April) (Number, threshold of 1000 bps is used for distressed issuers) Top-10 Leaders Top-10 Laggards 25 All EM issuers DSSI elligible issuers (22 issuers) Change in Latest Change in Latest Country spreads spread Country spreads spread Cameroon (117) 294 Senegal 39 450 20 Mozambique (59) 892 41 759 Tajikistan (51) 808 Georgia 52 194 15 (36) 242 53 717 Mongolia (29) 236 Belarus 71 710 (25) 57 El Salvador 141 719 10 Bolivia (23) 460 Sri Lanka 223 1,636 Iraq (20) 571 Zambia 285 2,759 (19) 444 Suriname 363 2,130 5 Armenia (19) 273 2,976 17,579 Turkey (19) 427 (15) 32 0 Poland (7) 9

4 Annex: Country Level Issuers Annex Table 1. Top-30 Issuers: Sovereign Bonds Annex Table 2. Top-30 Issuers: Corporate Bonds (USD billions) (USD billions) Issuer 2020 2021 Mar-21 Apr-21 May-21 Jun-21 Issuer 2020 2021 Mar-21 Apr-21 May-21 Jun-21 Mexico 14.9 8.3 - 3.3 - - China 121.0 62.1 7.6 7.3 10.3 9.5 Indonesia 10.8 8.1 - - 0.9 3.0 Brazil 20.6 16.0 1.0 1.4 0.8 6.6 Turkey 8.7 7.7 - - - 4.3 Qatar - 13.4 1.0 - - 12.4 Chile 5.5 7.7 1.5 - 2.0 0.0 United Arab Emirates 6.2 10.6 - 2.5 1.2 1.5 Saudi Arabia 11.9 6.8 - - - - Mexico 19.9 10.3 0.3 1.7 1.7 1.8 Philippines 6.4 6.0 0.5 2.5 - 3.0 India 12.9 8.9 1.9 - 0.7 1.2 Colombia 4.2 5.0 - 3.0 - - Indonesia 7.4 6.8 0.3 0.3 0.7 2.1 Oman 2.5 5.0 - - - 1.8 Saudi Arabia 14.7 6.7 0.7 - - 6.0 Peru 7.0 4.9 4.9 - - - Malaysia 1.5 5.5 0.9 4.0 - - Panama 5.2 4.7 - - - 2.1 Russia 10.0 5.2 - 0.4 0.6 0.5 13.2 4.1 - 4.1 - - Chile 8.3 2.6 0.9 0.5 - 0.4 Egypt 5.8 3.8 - - - - Poland - 2.5 - - 1.3 1.2 United Arab Emirates 20.8 3.2 1.2 - 2.0 - Peru 1.6 2.3 0.6 - - - Ghana 3.0 2.9 2.9 - - - Turkey 2.5 2.3 - 0.7 1.1 0.5 Dominican Republic 7.2 2.5 - - - - Ghana 0.7 2.3 - - 1.8 - Pakistan - 2.5 2.5 - - - South Africa 1.5 2.0 2.0 - - - 2.2 2.4 - - - - Colombia 2.8 2.0 - 0.4 0.6 1.0 Brazil 6.1 2.2 - - - 2.2 Bahrain 4.0 2.0 - - - - - 1.5 - - - 1.5 Russia 2.4 1.8 - - 1.8 - 1.6 1.4 - 0.3 - - Malaysia - 1.3 - 1.3 - - Philippines 2.3 1.3 - 0.6 0.2 0.6 4.0 1.3 - 1.3 - - Thailand 1.5 1.2 1.2 - - - Benin - 1.2 - - - - Bahrain - 0.9 0.6 - - - 3.3 1.2 - - - - Guatemala - 0.7 - 0.7 - - Côte d'Ivoire 1.2 1.1 - - - - Kuwait - 0.7 - 0.7 - - Kenya - 1.0 - - - 1.0 1.3 0.7 0.7 - - - Mongolia 0.6 1.0 - - - 1.0 Kenya - 0.6 - - - - Senegal - 0.9 - - - 0.9 Hungary - 0.6 - - - - Paraguay 1.5 0.9 - - - - Oman - 0.6 - - - - 0.8 0.8 0.8 - - - Georgia 0.2 0.5 - - - 0.5 Cameroon - 0.8 - - - 0.8 Pakistan - 0.5 - - 0.5 - Armenia - 0.7 - - - - Uruguay 0.5 0.6 - - 0.6 - Georgia - 0.5 - 0.5 - - - 0.4 - 0.4 - - Maldives - 0.3 0.2 0.1 - -

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