LONDON (Reuters) - Emerging market governments are selling long-dated foreign currency bonds like never before, data shows, taking advantage of what one banker called the last golden opportunity to lock in long-term debt at low rates.
With the world’s major central banks pumping trillions of dollars into the economy and pushing yields to record lows across the developed world, many investors have resorted to buying longer-dated and more risky debt to pick up returns.
This has presented emerging market countries with an opportunity to sell more longer term debt, and they have taken it.
The total value of emerging market debt with maturities of 30 years or later trebled in the five years to end-2017, to $191 billion, including a 100-year bond by serial defaulter Argentina, according to Thomson Reuters data.
As the overall amount of debt being sold has grown, the share of longer-dated issuance has also risen within it, the data showed.
Accounting for less than 5 percent of debt sold in 2016, longer-dated bonds made up nearly 8.5 percent of issuance in the first quarter of 2018.
Fund managers and bankers say governments are rushing to sell this type of debt ahead of an expected rise in borrowing costs, with the U.S. Federal Reserve expected to hike rates at least three times in 2018.
“This is a last golden opportunity to get these deals away. It is a no-brainer,” said one London-based syndicate banker who focuses on emerging markets within Europe, Middle East and Africa. “Certainly I am advising my clients to press the button if the price is right.”
This year, more frontier market issuers — a subsection of developing economies designated less developed and riskier — have joined the long bond bonanza, with Kenya and Senegal each selling 30-year bonds for the first time.
For a graphic on Emerging market long-dated debt issuance, click reut.rs/2qaCZhL
Reporting by Karin Strohecker and Abhinav Ramnarayan, Graphic by Ritvik Carvalho; Editing by Catherine Evans