Beware the Cresting Wave of Emerging Market Debt

随着借款人急于与饥饿的投资者努力达成优惠的交易，风险债券正在以前所未有的发展中销售。浪涌可能不会结束。

根据Doopogic的数据，今年11月14日，新兴市场的政府和公司在今年11月14日发布了2527亿美元的投机 - 级债券，击败了2016年全部销售的创纪录的1721亿美元。从去年的水平跳跃的47％可能是借款人的一个福音，但它令人担心投资者会因产量而受到伤害。

“With the high-yield markets facing headwinds after a very impressive run, an onslaught of new issuance runs a notably higher risk of being the straw that breaks the back of elevated valuations,” saysMohamed El-Erian, chief economic adviser at Allianz. “This is a possibility that investors in the asset class would regret.”

Tajikistan — not exactly a bastion of wealth — raised $500 million in September from its first international bond sale, a sum more than 7 percent of its gross domestic product. The Central Asian country will pay an annual interest rate of 7.125 percent for the below-investment-grade debt, according to the金融时报。In June, Argentina, which has defaulted on its debt eight times since gaining independence from Spain in 1816, sold $2.75 billion of 100-year bonds, also with a 7.125 percent coupon.

当市场广泛开放时，很难责备借款者提取有利交易。渴望将他们的资金放在新兴市场的债券上，以至于美国利率仍然很低，投资者可能会低估多少钱美国联邦储备分析师称，将收紧其货币政策和对新兴市场债务的影响。

“这是信贷周期的尾端，”棕色兄弟哈里曼＆Co.的全球新兴市场战略的胜利，借款人正在尽快推进门，借助于美联储正在提升利率。“

如果美联储官员的预测是正确的，到明年年底，美联储的基金利率将在2017年初的0.5％至0.75％的范围内至少增加。中央银行 - 最后提高了其基准利率6月份的范围为1％至1.25％ - 9月份，它可能会在12月再次徒步旅行，然后在2018年徒步旅行。仍然是11月14日，美联储资金期货市场价格为55.4％probabilitythat the central bank will lift rates no more than once in the first 11 months of next year, meaning many investors may be in for a rude awakening if the Fed’s projections turn out to be correct.

“We already saw the impact [of Fed tightening] during the taper tantrum of 2013,” says Ali Hassan, senior fixed-income analyst at Thornburg Investment Management in Santa Fe, New Mexico. He’s referring to the surge in bond yields globally after former Fed chair Ben Bernanke shook markets in May 2013 with his comments that the central bank was considering tapering its bond-buying program, which it had implemented after the 2008 financial crisis. Now, as the Fed continues steps toward tightening its monetary policy, Hassan warns that higher rates will hurt countries in the early stages of economic recovery, such as Brazil.

Rate hikes tend to push the U.S. dollar higher against foreign currencies, making it more expensive for emerging-markets borrowers to repay their dollar debt. Meanwhile, the fragile state of many developing countries’ finances is problematic because of their large budget and current-account deficits. Other risks include volatile commodity prices — rising crude prices can hurt oil-importing nations, for example, while falling prices can squeeze oil exporters — and geopolitical instability in areas like the Middle East and North Korea.

Many emerging-markets bonds are illiquid, which means they can be difficult for bondholders to sell when others are trying to do the same. “People could be running for a small and shrinking door,” says Thin, warning that investors may become stuck holding debt that’s dropping in value as buyers vanish.

Knowing the risks, why would investors accept the 7.125 percent rate offered by Argentina andTajikistan? “It’s an indication of frothiness and a reach for yield,” Hassan says. By comparison, the Bank of America Merrill Lynch U.S. High Yield Index had an effective yield of 5.84 percent on November 17.

Thin is a bit surprised by investors’ enthusiasm for emerging-markets debt, saying that “credit quality has really declined” and interest rates on junk bonds “aren’t high enough in many cases to compensate for the risk.” He points to Venezuela defaulting on some of its bonds in November, catching many debt holders off guard.

“A lot of investors are talking themselves into the idea that this is not such bad debt,” Thin says of emerging-markets deals. Even with more cynical investors, he adds, “you get the sense that people are holding their nose as they buy.”

This doesn’t mean every bond is toxic, with analysts still seeing investment opportunities in countries with stronger fundamentals, such as China, South Africa, Russia, and Thailand. But the burst of junk bond deals has made Arvind Rajan, head of global and macro at Prudential Financial’s PGIM Fixed Income division, more cautious. “We’re participating in fewer than one in ten issues that come to market,” he says.