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Emerging countries issue a flood of new bonds

Volodymyr Zelensky
Ukrainian President Volodymyr Zelensky. Photo: Emmanuel Dunand/AFP/Getty Images

Ukraine sold 1 billion euros of 7-year bonds in its first offer to international markets under new president — and former comedian — Volodymyr Zelensky, who was elected in April.

Why it matters: Ukraine's latest offering comes amid a flurry of new bond issuance, particularly from emerging markets, as declining interest rates in the U.S. and Europe (where German government bond yields have hit all-time lows) are encouraging countries to load up on new debt.

  • Last week Indonesia, Croatia, Lithuania, Ukraine, Peru and Serbia all announced plans to issue new bonds, with the first 4 successfully completing debt sales. Ecuador is said to be in talks to issue new bonds as well.

By the numbers: Ukraine's bonds came with a coupon on 6.75%, a far cry from the 10.5% yield on 7-year issues in January.

  • The bond issue could not have come at a better time. Ukrainian bond yields spiked last year as emerging-market debt sold off broadly, and as Zelensky rose in polls, because of uncertainty about his economic strategy and ability to deal with Russia.

The big picture: Emerging market countries and corporate entities have already issued a record amount of debt and look poised to increase the total further this year. Higher debt will put increased stress on balance sheets in the event of a global economic downturn.

Go deeper: Emerging markets are hot again after a rocky 2018