Eastern Europe, Middle East to lead emerging sovereign bond sales in 2025, Barclays says

By Siddarth S and Johann M Cherian

Nov 5 (Reuters) – Emerging market hard-currency sovereign bond sales are projected to hit $125-$130 billion in 2025, Barclays estimated on Tuesday, with the bulk coming from the Eastern Europe, Middle East and African (EEMEA) region.

Bond supply from EEMEA governments is estimated to reach $75 billion, followed by Latin America at $31 billion and Asia at $22 billion, the bank said.

Next year’s bond sales are set to be slightly short of the $155-$160 billion sovereign issuance Barclays expects for 2024 and closer to the long-term historical average.

“We expect net supply for the asset class to be broadly flat and balanced across the regions,” said Barclays’ Andreas Kolbe.

“Large redemptions in January, especially from Latam, are likely to provide technical tailwinds early in the year,” Kolbe added, pointing to bonds in Brazil, Argentina and Chile maturing.

January and February are usually heavy months for international bond sales in emerging markets.

Unlike this year, when bond sales from investment grade sovereigns dominated issuance, next year could see more supply from riskier ‘BB’-rated government issuers, with Turkey leading alongside Brazil, Colombia and South Africa, Barclays said.

S&P Global recently raised the sovereign rating of Turkey – one of the heaviest issuers in emerging markets, citing greater foreign exchange reserves and falling inflation due to the tight monetary stance of the country’s central bank.

Among single-B rated names, Nigeria and Angola are expected to tap international capital markets next year, along with Senegal and Kenya. Egypt could look for regional demand and issue an Islamic bond, or sukuk, along with a set of hard-currency bonds, Barclays said.

Falling global interest rates usually pave the way for higher bond issuance from lower-rated emerging market governments, whose borrowing costs in hard currency are tethered to U.S. interest rates. The U.S. Federal Reserve is expected to lower interest rates by another 25 basis points on Thursday after kicking off its easing cycle with a bumper 50 bps cut in September.

Governments in the Middle East, such as Saudi Arabia and the United Arab Emirates, are also expected to issue bonds again, Barclays said. Saudi Arabia is expected to issue $8 billion in 2025, with bond sales increasingly shifting towards its sovereign wealth fund, it added.

(Reporting by Siddarth S and Johann Cherian in Bengaluru, editing by Karin Strohecker and Christina Fincher)

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