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Emerging Markets Shift To Domestic Bonds


September, 18 2017
watermark Economic news

The bond market became stronger amid all the external shocks and rise in general levels of debt in the emerging market as investors shifted to longer-dated bonds and domestically-issued bonds.

It has been forecasted by the Bank for International Settlement that the rise in debt levels would become a new problem which has been forewarned before. Although, the changes would still depend on the structure and assuage the problem at hand. Nevertheless, borrowing is mostly executed in local currencies at long-term maturities with a fixed rate. Foreign bonds declined from 32 percent since the end of 2001.

These would reinforce the viability of public finance and lessen rollover risks and imparity of currencies as stated by the BIS. Longer tenor bonds would result in higher bond yields internationally since advanced countries implemented loose credit policies  and interest rates would push the price lower for long-dated bonds compared to short-term tenor.

According to the most recent report on Sunday, the government debt in emerging markets is aggregated to be at $11.1 trillion which has doubled in value since the latter part of 2007. On the other hand, the public debt partly contributing to the gross domestic product soared by 51 percent and 10 percentage points higher by the end of 2007. At the same time, statistics showed that bond maturities have firmly increased over the emerging markets with the average maturity of 7.7 years including 23 countries such as Mexico and South Africa. Notably, this is just a bit lower than the average figure in 8 years among industrialized nations.


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Foreign exchange is highly speculative and complex in nature, and may not be suitable for all investors. Forex trading may result in a substantial gain or loss. Therefore, it is not advisable to invest money you cannot afford to lose. Before using the services offered by ForexMart, please acknowledge the risks associated with forex trading. Seek independent financial advice if necessary. Please note that neither past performance nor forecasts are reliable indicators of future results.