Yield-hungry investors are once again fuelling a borrowing bonanza across developing nations, prompting a record surge in hard currency bond issuance, all in a mad dash to lock in funding before the next global hiccup.
So far this year, governments and corporations in emerging markets have issued $331 billion worth of debt denominated in stable currencies, such as the US dollar and the euro, at the fastest pace in four years, already surpassing the total for the first half of 2024. There’s nothing like the whiff of geopolitical instability and a wobbling greenback to stir up a debt frenzy.

Driven by the weakening US dollar and questions surrounding America’s global economic dominance, international investors are piling into emerging market assets with barely restrained enthusiasm. JPMorgan and Bank of America are confidently forecasting more upside. At the same time, Société Générale cheerfully describes the moment as a “Goldilocks” phase for local EM bonds.
According to JPMorgan’s spread index, the extra yield for owning EM dollar bonds over US Treasuries has shrunk to levels not seen since 2020. But this narrowing isn’t due to improved fundamentals. It’s thanks to tighter US spreads. Investors are happy to chase anything that offers a coupon these days.

This borrowing binge began in earnest as emerging market (EM) sovereigns started dusting themselves off after the 2024 post-pandemic defaults. Countries from Vietnam to Chile unveiled reform plans, and investors, true to form, took the bait. Even Trump’s global tariff tantrum in April, which rattled markets, proved only a brief hiccup. With that threat temporarily shelved, EM debt markets have rebounded in force — though July may bring another twist when the tariff review resumes.
EM has become a relative safe haven. Fundamentals have improved, she argues, and those who’ve behaved are being rewarded. Whether markets will continue to hand out gold stars remains to be seen.

Interestingly, over 70% of this year’s issuance has come from investment-grade borrowers. Mexico, Saudi Arabia, and even China-adjacent deals have returned to the fray. The Middle East, which has been awash with borrowing needs since oil prices declined, now accounts for over 40% of CEEMEA’s supply.
Even Latin America’s been dusting off its offshore playbooks. The region could exceed 2024 levels, as everyone from Brazil to Peru and even Telecom Argentina taps international markets. Kyrgyzstan, not to be left out, launched its maiden $700 million bond, pulling in over $2.1 billion in demand with an 8% yield. Well done, Kyrgyzstan, until the next IMF visit.

In short, everyone’s raising money now while the music plays, but when the tune changes, don’t be surprised if the chairs are suddenly gone.