Sub-Saharan Africa left behind in EM debt rush, Moody's says

10/13/2020 | 10:56am

LONDON, Oct 13 (Reuters) - The world's poorest countries are struggling to get access to international debt markets, rating agency Moody's said on Tuesday, even as bond issuance by bigger emerging markets and the rest of the world surges to record highs.

With $488 billion of emerging-market Eurobonds -- debt denominated in dollars and other major currencies -- already sold by countries needing to fill COVID budget holes this year, last year's record $590 billion is on course to be broken.

Middle East governments have accounted for over a third of all emerging-market sovereign issuance this year as they try to make up for lost oil revenues. None were sold by sub-Saharan African countries between July and September.

"Investment-grade debt issuers are taking full advantage of attractive funding conditions in global emerging markets," said Rahul Ghosh, a senior vice president at Moody's.

"However, the picture is very different for issuers lower down the credit-quality spectrum, where market access remains challenging," Ghosh said, referring to the disparity as a "two-speed recovery".

Last quarter did see a drop in the pace of overall emerging-market sovereign issuance, but it won't change the overall picture of a surge in debt, helped by global stimulus, which has pushed down interest rates and allowed longer-term debt.

The United Arab Emirates, Qatar and Saudi Arabia have issued the most debt so far this year. Indonesia, Romania and Mexico have also raised more than $10 billion, and sources told Reuters on Tuesday that China was readying a $6 billion bond.

Emerging-market corporate issuance has also picked up, especially in property and real estate, Moody's said, but riskier, high-yielding corporate bond issuance in emerging markets remains below 2019's trajectory.

Corporate issuance was unlikely to accelerate much into the end of the year and the start of 2021, "given expectations of a tentative recovery in economic growth," Moody's added.

(Reporting by Elizabeth Howcroft and Marc Jones, editing by Larry King)

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