Emerging Market Debt - Issuance

Issuance

Emerging market debt is primarily issued by sovereign issuers. Corporate debt does exist in this category, but corporations in developing countries generally tend to borrow from banks and other sources, as public debt issuance requires both sufficiently developed markets and large borrowing needs. Sovereign issuance has historically been primarily issued in foreign currencies (external debt), either US Dollars or Euros (hard currency versus local currency). In recent years, however, the development of pension systems in certain countries has led to increasing issuance in local currencies.

EMD tends to have a lower credit rating than other sovereign debt because of the increased economic and political risks - where most developed countries are either AAA or AA-rated, most EMD issuance is rated below investment grade, though a few countries that have seen significant improvements have been upgraded to BBB or A ratings, and a handful of lower income countries have reached ratings levels equivalent to more profligate developed countries. In the wake of the credit crunch and the 2010 European sovereign debt crisis, certain emerging market countries have emerged as possibly less prone to default than developed markets.