Frontier-Debt Buyers Look Past Default Risk in Hunger for Yield
- Bonds seen attractive after rout sparked by Sri Lanka, Ukraine
- High-yield risk premium rose to second highest in 13 years
Customers queue to buy fuel at a gas station in Kandy, Sri Lanka, on June 17.
Photographer: Buddhika Weerasinghe/BloombergThis article is for subscribers only.
Signs of distress flashing in bond markets suggest the world’s poorest nations are set to see a wave of debt restructurings. But a growing cohort of investors say that’s a buying opportunity.
Panic selling in the aftermath of Sri Lanka’s economic collapse has sent the average yield in junk-rated emerging economies to almost 900 basis points above US Treasuries, the highest risk premium in 13 years except for the Covid-related rout in 2020, according to JPMorgan Chase & Co. data. Yet, initial fears about a widespread default Armageddon across emerging markets is easing, and money managers are looking beyond the handful of countries that may reschedule their debt.