Developing nations led by South America and eastern Europe are due to offer about $48 billion more in bonds this year, with investors likely to snap them up after a drop in debt sales in May, said ING Groep NV.
“The dearth of issuance recently will result in increased cash for investors who are receiving securities flows,” David Spegel, ING’s New York-based head of emerging-market strategy, wrote in a research note dated June 4. “This will help set the stage for a strong demand-driven recovery of issuance and secondary markets.”
South American nations including Brazil, Peru and Argentina will lead debt sales with $24.3 billion in sovereign issuance expected from the region during the rest of this year, ING said. Emerging Europe will account for $12.6 billion in bond sales with Russia, Slovakia and Hungary expected to be the biggest issuers, according to the brokerage.
Developing-nation governments have raised $48.6 billion through bond sales so far in 2010, and companies in emerging markets have sold $70.6 billion of debt, with at least another $46 billion of corporate bonds expected to be issued by yearend, ING said.
“Investor appetite for credit risk proved to be little affected by the crisis” in Europe sparked by Greece’s financial problems, Spegel wrote.
ING does not share the view expressed in the “extravagant statements” made by Hungary’s leaders last week that the nation faces a potential default on its debt, Spegel said in the note. Hungary’s government downplayed its risk of default at the weekend after leaders spent two days saying the nation was at risk of a Greece-like debt crisis.
The extra yield investors demand to hold developing-nation bonds over U.S. Treasuries was at 3.31 percentage points today, compared with a 2010 high of 3.55 percentage points on May 25 and low of 230.86 percentage points on April 15, according on JPMorgan Chase & Co. indexes.