Global Liquidity and External Bond Issuance in Emerging Markets and Developing Economies

Using the universe of all externally issued bonds by corporates and sovereigns in emerging and developing economies during 2000-14, this paper analyzes various issuance trends, including the unprecedented post-crisis surge. The paper focuses on ext...

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Bibliographic Details
Main Authors:	Feyen, Erik, Ghosh, Swati, Kibuuka, Katie, Farazi, Subika
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	RISK PROFILES CREDIT MARKETS MONETARY POLICY HOLDING BORROWER CROSS-BORDER FLOWS ACCOUNTING LONG-TERM INTEREST REAL INTEREST RATES INTEREST POST-CRISIS PERIOD EMERGING MARKET BOND RATE OF RETURN REAL EXCHANGE RATES CREDIT SPREAD OPTION PRIVATE CREDIT BOND SPREADS DOMESTIC MARKET DEVELOPING COUNTRIES TOTAL DEBT EXPORTERS PORTFOLIO SOVEREIGN ENTITIES CREDITWORTHINESS BORROWERS LIQUIDITY PREMIUM CURRENT ACCOUNT SURPLUSES EXTERNAL FINANCE BOND ISSUANCES FOREIGN INVESTOR BACKED SECURITY CURRENCY INTERNATIONAL BOND MARKETS TRANCHES FOREIGN CURRENCIES EXCHANGE RATES BOND ISSUANCE MORTGAGE-BACKED SECURITY INTERNATIONAL BOND EMERGING MARKET FINANCIAL INSTITUTIONS DEBT MARKETS BOND ISSUE INTERNATIONAL DEBT INVESTMENT OPPORTUNITIES BORROWING COSTS BANK CREDIT EQUITIES BANK POLICY CURRENT ACCOUNT DEFICITS MARKET ECONOMIES EMERGING MARKETS CURRENCY RISKS FEDERAL RESERVE BOND MARKETS BOND “SPREADS INTERNATIONAL FINANCIAL STATISTICS COUNTRY RISK LONG-TERM INTEREST RATE DOMESTIC LIQUIDITY INTERNATIONAL DEBT SECURITIES FUTURE BOND “SPREAD DEBT SECURITIES ISSUANCE DEBT STOCKS REAL EXCHANGE RATE LOCAL CURRENCY MONETARY POLICIES SECURITIES EXPORTER BOND MATURITY TREASURY CREDIT SPREADS CURRENCIES ECONOMIC DEVELOPMENT TAX CODE GLOBAL TRADE OUTSTANDING STOCKS COMMERCIAL BANKS CORPORATE BOND TREASURY BONDS FINANCIAL RISKS TREASURY YIELDS LENDING RISKY ASSETS MATURITIES RISK AVERSION LOCAL CURRENCIES FINANCIAL SYSTEMS PORTFOLIO FLOWS INTERNATIONAL BANKS BACKED SECURITIES GLOBAL FINANCIAL STABILITY DEPOSIT MORTGAGE- BACKED SECURITIES BASIS POINTS LIABILITY OUTSTANDING STOCK OIL PRICE EQUITY FLOWS STOCK BOND MATURITIES ASSET PRICES EMERGING ECONOMIES INTEREST RATE EXCHANGE BANKING SYSTEM TREASURIES INTERNATIONAL BOND MARKET ISSUANCES LIQUIDITY EQUITY MARKET GOVERNMENT BOND MARKET REAL INTEREST MORTGAGE DEFAULT RISK BONDS ISSUANCE OF BONDS TAX GOVERNMENT BOND BOND YIELDS INVESTOR BASE RESERVE FINANCIAL FRAGILITIES INTERNATIONAL BANK EMERGING MARKET ECONOMIES BANK LENDING CENTRAL BANK MATURITY INTERNATIONAL FINANCE BOND FLOWS TREASURY YIELD BOND YIELD PRIMARY MARKET CONTRACTS BOND DEAL INTEREST RATES OPTIONS IMPLIED VOLATILITY RETURN DEFICITS REAL INTEREST RATE RESERVES LOCAL FINANCIAL MARKETS INFORMATION ON BORROWERS FINANCIAL SYSTEM FINANCE FOREIGN CURRENCY RISK PREMIUMS PUBLIC INVESTMENT BORROWING CAPACITY BOND DEALS EQUITY SECURITIES MARKETS INVESTORS RISK NEUTRAL YIELD CURVES INTERNATIONAL BANKING FINANCIAL STABILITY GOVERNMENT BOND MARKETS PRIVATE SECTOR CREDIT TRANCHE FINANCIAL CRISIS POST-CRISIS PERIODS SECONDARY MARKETS RETURNS MORTGAGE-BACKED SECURITIES SHORT-TERM DEBT INVESTOR CONFIDENCE LONG-TERM INTEREST RATES DEBT MATURITIES PUSH FACTOR MATURITY EXTENSION BOND MARKET YIELD CURVE EXPENDITURES CAPITAL FLOWS BALANCE SHEET DEFAULT HEDGES MARKET CREDIT RATING MARKET DEBT PRODUCTIVE INVESTMENTS FOREIGN CURRENCY EXPOSURES CORPORATE DEBT GOODS INVESTOR CORPORATE BONDS EQUITY INDEX SECURITY FINANCIAL DEVELOPMENT EQUITY MARKETS INTERNATIONAL MARKET STOCKS INVESTMENT BOND SHARE BALANCE SHEETS CREDIT QUALITY FINANCIAL MARKETS ASSET BACKED SECURITIES PUSH FACTORS FINANCIAL SHOCKS INDIVIDUAL BOND BOND PRICES CAPITAL INFLOWS MONEY MARKET EXTERNAL DEBT INVESTMENTS CREDIT GROWTH FINANCIAL RISK EXCHANGE RATE ASSET CLASS DEBT SERVICING INTERNATIONAL INVESTORS TREASURY RATE INTERNATIONAL SETTLEMENTS INCOME LEVEL SWAP EXTERNAL BORROWING
Online Access:	http://documents.worldbank.org/curated/en/2015/07/24775841/global-liquidity-external-bond-issuance-emerging-markets-developing-economies http://hdl.handle.net/10986/22448

Description
Summary:	Using the universe of all externally issued bonds by corporates and sovereigns in emerging and developing economies during 2000-14, this paper analyzes various issuance trends, including the unprecedented post-crisis surge. The paper focuses on external issuance at the country-industry and individual bond levels and finds that global factors matter greatly for emerging and developing economies issuance. A decrease in U.S. expected equity market (or interest rate) volatility, U.S. corporate credit spreads, and U.S. interbank funding costs and an increase in the Federal Reserve’s balance sheet (i) raise the odds that the monthly issuance volume of a country-industry is above its historical average; (ii) decrease individual bond yields and spreads; and (iii) raise bond maturities, after controlling for country pull factors, bond characteristics (for example, type of issuer, industry, and riskiness). Additionally, we document support that the risk-taking channel of exchange rate appreciation also operates for external bond issuance. Moreover, while the paper finds that country pull factors affect the impact of global factors, it does not find consistent evidence for this across the board. This result suggests that, during loose global funding conditions, flows are mostly driven by push factors and do not systematically discriminate between emerging and developing economies. Taken together, the findings suggest that although issuers might be able to benefit from benign international funding conditions, the large issuance volumes, currency risks, and high exposure to global factors could pose external and domestic challenges for policy makers, particularly when global cycles reverse.

Global Liquidity and External Bond Issuance in Emerging Markets and Developing Economies

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