A vast backlog of bonds that need to be refinanced over the next year has built up in the emerging market economies, raising the threat of defaults and company closures. With the ability to raise money in the debt markets severely restricted because of the credit crisis, emerging market banks and companies could struggle to roll over $111bn of maturing debt, according to ING Wholesale Banking. Of the $111bn in bonds that will mature before the end of 2009, $24bn worth are held by junk-rated groups that have almost no hope of tapping a market averse to risk. Emerging market bond issuance has fallen steadily this year. Only $330m worth of bonds have been issued this month compared with $10bn as recently as July. In August last year, issuance averaged about $20bn a month, according to ING. Although sentiment improved on Friday, EM have been hit, with the MSCI share index down 14% since the start of the month and yields on the Embi+ sovereign bond index up 20% against US Treasuries.

This entry was posted by Gwen Robinson on Monday, September 22nd, 2008 at 5:31 and is filed under Capital markets. Edit this entry.