Local issuance pushes emerging market bond sales up to $819 billion, Moody's says

By Paul A. Harris

St. Louis, Sept. 18 - Emerging markets' issuance was $819 billion during the first eight months of 2003 - although most of it was local market issuance, according to a report issued Thursday by Moody's. The total represents a 30% increase from the same period in 2002.

The large increase was driven by new issuance in the local markets which rose about 32% over the same period in 2002 and, to a lesser extent, new issuance in the international capital markets which rose about 19% over the same period in 2002, Moody's added.

Asia was the region which issued the most bonds, accounting for about 59% of the total amount of new bond issuance ($483 billion) during the first eight months of 2003, down from 68% of the total in 2002. Eastern Europe, the runner-up, issued about 18% of the total ($146 billion) during the same period, up from only 10% in 2002 and 5% in 2001. Moody's said that was not surprising since yield spreads for Eastern European countries have come down significantly since the second half of last year on the back of the possible entry to the European Union.

Latin America, in third place, issued about 17% of total ($138 billion), up from 15% of total in 2002 when several countries in the region lost access to the international financial markets due to political and economic difficulties. Prior to 2002, however, Latin America contributed about a third of the total bond issuance in the local and international markets.

Sovereign issuers are the major players in the new issuance markets. Sovereign issuers contributed about 69% of the new bonds during the first eight months of 2003, up from about 59% in 2002. In August, however, the share of new sovereign debt issuance declined somewhat to 55% of the total, down from 67% in July.

This was likely because major corporations started to step up issuance to finance their investments in expectation of a possible pick-up in economic activity, Moody's said. Moreover, many sovereign issuers have completed their issuing plans for the year.

By region, sovereign issuance accounted for over 85% of the new debt from Latin America and the Caribbean during the first eight months of the year, while the issuance from the corporate and financial sectors made up for the rest-less than 15% of the new debt. Meanwhile, sovereign bond issuance from Asia, Eastern Europe and countries from the former Soviet Union (CIS) each accounted for slightly less than two thirds of their new debt during the same period, while the issuance from the corporate and financial sectors made up the rest, over a third of the new debt.

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