Market Analysis

Emerging Markets: Assessment of Hard-Currency Bond Market

June 14, 2020

At the time of this writing, economies across the globe are dealing with the challenges from the COVID-19 pandemic, and emerging market economies that have less room for fiscal and monetary maneuvering could potentially be hit hard by the crisis. For the eventual economic recovery, however, governments and issuers may see green and social bonds as a way of meeting environmental goals, mitigating the negative health and socioeconomic impacts, building sustainable financial systems, and transitioning to a more balanced world economy.

The Emerging Markets: Assessment of Hard-Currency Bond Market report finds that 60 emerging-market countries host 804 financial institutions, including 398 banks, that are issuing hard-currency bonds with a total of $648 billion in outstanding value as of June 2019. While relatively small compared to the global bond market ($107 trillion at the end of 2018), the segment is sufficiently large and diversified to deploy specific investment strategies. Since these financial-sector bond issuers tend to be among the most sophisticated in emerging markets, many of them are well-equipped to become first-time green bond issuers as their next steps. As market conditions return to normal, we may see some pent-up supply of green bonds beginning to emerge.

International Finance Corporation 2020