Emerging market (EM) debt issuance will soften in 2021 from last year's record highs but will remain above pre-pandemic levels as still-elevated funding needs and improving risk sentiment support overall bond market activity, Moody's Investors Service said in a report on Thursday.
EM debt issuers brought $639 billion of eurobonds to market last year, exceeding the previous peak set in 2017 and breaking the $600 billion mark for the first time, as high-rated issuers secured financing in the wake of the pandemic.
"In 2021, emerging markets volumes are unlikely to eclipse 2020 levels as a pick-up in GDP growth and commodity prices supports revenue recovery and reduces emergency spending needs," said Rahul Ghosh, Moody's Senior Vice President and the report's author.
"However, historically elevated budget deficits will still require significant funding."
Improving global risk appetite and falling credit spreads will allow more non-investment grade issuers to access markets in the coming year. However, risks include a sudden jump in global inflation expectations, coronavirus containment challenges and concerns over rising EM debt burdens.
Issuers across larger emerging markets, notably China, have also benefited from strong local market appetite and liquid domestic capital markets to meet their financing needs.