Some of the world’s most precarious sovereign borrowers are tiptoeing back into international debt markets, eager to cash in on investors’ growing appetite for yield, or, depending on your view, their growing disregard for memory.
Suriname, fresh out of default just two years ago, raised nearly $1.6 billion in a bond sale that might have made even the IMF blink. It joins a growing parade of comeback acts, Angola, Kenya, and soon, if Wall Street is to be believed, Argentina. JPMorgan now calls Buenos Aires’s market re-entry “plausible,” which, in banker-speak, means “let’s pretend we’ve forgotten 2020.” Meanwhile, Laos, rated a noble CCC+, is busy chatting up investors for a benchmark issue of its own.
The timing is convenient. Global growth is ticking along, central banks are expected to cut rates, and the search for yield has become almost a religious pursuit. The spread between emerging-market sovereigns and US Treasuries has narrowed to a decade-low, giving even serial defaulters a fresh chance to “regain market access”, a euphemism for “borrow again before the next crisis.”
The market has been waiting for high-yield issuers to emerge and put their idle cash to work. New deals, he added, were very well received, unsurprising in a world where due diligence has become a nostalgic concept.
Angola raised $1.75 billion, Kenya sold $1.5 billion, and the Democratic Republic of Congo’s $700 million issue earlier this year drew three times as much demand. In short, frontier debt is fashionable again, and the queue to refinance is growing by the week.
More than $50 billion has flowed into emerging-market assets so far this year, thanks to diversification FOMO and the hope that Jerome Powell will keep cutting until the music stops. Even Powell’s warning last week, that a December rate cut isn’t “a given”, barely dented the optimism. Investors, it seems, prefer denial to discipline.
For yield-hungry fund managers, it’s a dream. For debt-burdened governments, it’s a lifeline. With borrowing costs falling and repayment schedules looming, finance ministers are rushing to pre-fund next year’s budgets, or, as they might say, “signal confidence to markets.”
Argentina, of course, remains the market’s favourite soap opera. Flush with President Javier Milei’s mid-term victory and his newfound affection for Washington, Buenos Aires is now whispered to be “within reach” of reissuing bonds. US Treasury Secretary Scott Bessent insists that the country’s refinancing needs “can be easily met”, a phrase once used about Turkey, Lebanon, and Venezuela.
Suriname will use its proceeds to prepay old oil-linked bonds. Argentina, meanwhile, faces $4 billion in payments due in January and $9 billion over the year — but optimism, as ever, remains in ample supply.
Elsewhere, Laos is pushing ahead with its own issue at around 11.25 per cent, because nothing says “fiscal health” like double-digit yields.
Across emerging markets, the mood is almost euphoric. Investors, lulled by cheap money and short memories, are once again lending to the same names that burned them before, proving that in global finance, forgiveness is infinite, and due diligence perishes long before hope does.
Yet this party may not last long. Should inflation in the United States prove stickier than expected, the Federal Reserve may rediscover its hawkish instincts and start tightening again, perhaps as soon as the second quarter of next year, if not before. When that happens, the tide of easy money propping up these fragile borrowers will ebb once more, and those same “usual suspects” may find themselves, once again, without a chair when the music stops.