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 ext...
| Main Authors: | , , , |
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| 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 |
| Summary: | 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. |
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