Emerging-market borrowers are increasingly turning to the euro bond market, capitalising on strong demand for diversification away from the US dollar. This surge is driven by robust interest in developing debt, with non-dedicated investors playing a significant role as credit quality improves. Euro-denominated bonds, while still a small portion of total emerging-market supply, are expected to maintain high volumes, both in absolute terms and relative to dollar-denominated deals.
Stefan Weiler, the head of debt capital markets for Central Europe, the Middle East and Africa at JPMorgan Chase & Co. in London, noted that borrowers are actively diversifying and exploring niche markets. “If you have an ambition to issue in euros, this is the time to do it,” Weiler stated.
The dollar index has fallen approximately 8 per cent this year, prompting money managers to reassess their heavy exposure to US assets amid market volatility caused by tariff policies and Federal Reserve actions. Signs of decreasing demand for the US dollar are emerging, and low hedge ratios suggest potential for further declines.
Companies and governments from developing economies have issued €89 billion of euro-denominated debt this year through July 18, marking the highest amount for this period since at least 2014, according to Bloomberg data. Government issuance alone has already surpassed the total for all of 2024. While Eastern Europe, particularly Poland and Romania with a combined €21 billion, accounts for most of the euro issuance, other borrowers, including Chile, South Korea and China, have also recently accessed the market.
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