Global Liquidity and External Bond Issuance in Emerging Markets and Developing Economies

Using the universe of all externally issued bonds by corporates and sovereigns in emerging and developing economies during 2000-14, this paper analyzes various issuance trends, including the unprecedented post-crisis surge. The paper focuses on external issuance at the country-industry and individual bond levels and finds that global factors matter greatly for emerging and developing economies issuance. A decrease in U.S. expected equity market (or interest rate) volatility, U.S. corporate credit spreads, and U.S. interbank funding costs and an increase in the Federal Reserve’s balance sheet (i) raise the odds that the monthly issuance volume of a country-industry is above its historical average; (ii) decrease individual bond yields and spreads; and (iii) raise bond maturities, after controlling for country pull factors, bond characteristics (for example, type of issuer, industry, and riskiness). Additionally, we document support that the risk-taking channel of exchange rate appreciation also operates for external bond issuance. Moreover, while the paper finds that country pull factors affect the impact of global factors, it does not find consistent evidence for this across the board. This result suggests that, during loose global funding conditions, flows are mostly driven by push factors and do not systematically discriminate between emerging and developing economies. Taken together, the findings suggest that although issuers might be able to benefit from benign international funding conditions, the large issuance volumes, currency risks, and high exposure to global factors could pose external and domestic challenges for policy makers, particularly when global cycles reverse.

Bibliographic Details

Main Authors:	Feyen, Erik, Ghosh, Swati, Kibuuka, Katie, Farazi, Subika
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2015-07
Subjects:	RISK PROFILES, CREDIT MARKETS, MONETARY POLICY, HOLDING, BORROWER, CROSS-BORDER FLOWS, ACCOUNTING, LONG-TERM INTEREST, REAL INTEREST RATES, INTEREST, POST-CRISIS PERIOD, EMERGING MARKET BOND, RATE OF RETURN, REAL EXCHANGE RATES, CREDIT SPREAD, OPTION, PRIVATE CREDIT, BOND SPREADS, DOMESTIC MARKET, DEVELOPING COUNTRIES, TOTAL DEBT, EXPORTERS, PORTFOLIO, SOVEREIGN ENTITIES, CREDITWORTHINESS, BORROWERS, LIQUIDITY PREMIUM, CURRENT ACCOUNT SURPLUSES, EXTERNAL FINANCE, BOND ISSUANCES, FOREIGN INVESTOR, BACKED SECURITY, CURRENCY, INTERNATIONAL BOND MARKETS, TRANCHES, FOREIGN CURRENCIES, EXCHANGE RATES, BOND ISSUANCE, MORTGAGE-BACKED SECURITY, INTERNATIONAL BOND, EMERGING MARKET, FINANCIAL INSTITUTIONS, DEBT, MARKETS, BOND ISSUE, INTERNATIONAL DEBT, INVESTMENT OPPORTUNITIES, BORROWING COSTS, BANK CREDIT, EQUITIES, BANK POLICY, CURRENT ACCOUNT DEFICITS, MARKET ECONOMIES, EMERGING MARKETS, CURRENCY RISKS, FEDERAL RESERVE, BOND MARKETS, BOND “SPREADS, INTERNATIONAL FINANCIAL STATISTICS, COUNTRY RISK, LONG-TERM INTEREST RATE, DOMESTIC LIQUIDITY, INTERNATIONAL DEBT SECURITIES, FUTURE, BOND “SPREAD, DEBT SECURITIES, ISSUANCE, DEBT STOCKS, REAL EXCHANGE RATE, LOCAL CURRENCY, MONETARY POLICIES, SECURITIES, EXPORTER, BOND MATURITY, TREASURY, CREDIT SPREADS, CURRENCIES, ECONOMIC DEVELOPMENT, TAX CODE, GLOBAL TRADE, OUTSTANDING STOCKS, COMMERCIAL BANKS, CORPORATE BOND, TREASURY BONDS, FINANCIAL RISKS, TREASURY YIELDS, LENDING, RISKY ASSETS, MATURITIES, RISK AVERSION, LOCAL CURRENCIES, FINANCIAL SYSTEMS, PORTFOLIO FLOWS, INTERNATIONAL BANKS, BACKED SECURITIES, GLOBAL FINANCIAL STABILITY, DEPOSIT, MORTGAGE- BACKED SECURITIES, BASIS POINTS, LIABILITY, OUTSTANDING STOCK, OIL PRICE, EQUITY FLOWS, STOCK, BOND MATURITIES, ASSET PRICES, EMERGING ECONOMIES, INTEREST RATE, EXCHANGE, BANKING SYSTEM, TREASURIES, INTERNATIONAL BOND MARKET, ISSUANCES, LIQUIDITY, EQUITY MARKET, GOVERNMENT BOND MARKET, REAL INTEREST, MORTGAGE, DEFAULT RISK, BONDS, ISSUANCE OF BONDS, TAX, GOVERNMENT BOND, BOND YIELDS, INVESTOR BASE, RESERVE, FINANCIAL FRAGILITIES, INTERNATIONAL BANK, EMERGING MARKET ECONOMIES, BANK LENDING, CENTRAL BANK, MATURITY, INTERNATIONAL FINANCE, BOND FLOWS, TREASURY YIELD, BOND YIELD, PRIMARY MARKET, CONTRACTS, BOND DEAL, INTEREST RATES, OPTIONS, IMPLIED VOLATILITY, RETURN, DEFICITS, REAL INTEREST RATE, RESERVES, LOCAL FINANCIAL MARKETS, INFORMATION ON BORROWERS, FINANCIAL SYSTEM, FINANCE, FOREIGN CURRENCY, RISK PREMIUMS, PUBLIC INVESTMENT, BORROWING CAPACITY, BOND DEALS, EQUITY, SECURITIES MARKETS, INVESTORS, RISK NEUTRAL, YIELD CURVES, INTERNATIONAL BANKING, FINANCIAL STABILITY, GOVERNMENT BOND MARKETS, PRIVATE SECTOR CREDIT, TRANCHE, FINANCIAL CRISIS, POST-CRISIS PERIODS, SECONDARY MARKETS, RETURNS, MORTGAGE-BACKED SECURITIES, SHORT-TERM DEBT, INVESTOR CONFIDENCE, LONG-TERM INTEREST RATES, DEBT MATURITIES, PUSH FACTOR, MATURITY EXTENSION, BOND MARKET, YIELD CURVE, EXPENDITURES, CAPITAL FLOWS, BALANCE SHEET, DEFAULT, HEDGES, MARKET, CREDIT RATING, MARKET DEBT, PRODUCTIVE INVESTMENTS, FOREIGN CURRENCY EXPOSURES, CORPORATE DEBT, GOODS, INVESTOR, CORPORATE BONDS, EQUITY INDEX, SECURITY, FINANCIAL DEVELOPMENT, EQUITY MARKETS, INTERNATIONAL MARKET, STOCKS, INVESTMENT, BOND, SHARE, BALANCE SHEETS, CREDIT QUALITY, FINANCIAL MARKETS, ASSET BACKED SECURITIES, PUSH FACTORS, FINANCIAL SHOCKS, INDIVIDUAL BOND, BOND PRICES, CAPITAL INFLOWS, MONEY MARKET, EXTERNAL DEBT, INVESTMENTS, CREDIT GROWTH, FINANCIAL RISK, EXCHANGE RATE, ASSET CLASS, DEBT SERVICING, INTERNATIONAL INVESTORS, TREASURY RATE, INTERNATIONAL SETTLEMENTS, INCOME LEVEL, SWAP, EXTERNAL BORROWING,
Online Access:	http://documents.worldbank.org/curated/en/2015/07/24775841/global-liquidity-external-bond-issuance-emerging-markets-developing-economies http://hdl.handle.net/10986/22448
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