- EM sovereign external debt issuance reached new highs in 2020 at c. USD225bn. Past weeks were frenzy with exotic names and very long issuance. Indonesia can still come to the market until yearend.
- Gross issuance will decline next year at USD150bn in the wake of tighter fiscal deficits. GCC and Latin America are likely to remain the largest issuers, albeit declining, followed by Asia. We do not expect the large issuance surprises to repeat again in 2021.
- The main striking change will be the rise of EM HY issuance from countries which were reluctant to issue in 2020 on poor idiosyncratic market conditions. We then expect EM HY issuance to gradually normalise in 2021 and it could reach 40% of total issuance, just below its post-GFC average.
- The rise in EM HY issuance does not affect our positive EM BB view. Indeed, EM net issuance will decline substantially and it could be in the sub USD50bn region, its lowest level since 2015.
- January will be busy in terms of issuance given the still large financing needs. Sovereigns will try to benefit from a positive EM environment, spread compression and significant cash inflows to investors.