By Libby George
LONDON, March 27 (Reuters) – A record start to the year for emerging-market debt sales has largely ground to a halt as worries over the Iran war create havoc in the markets and push up borrowing costs, bankers and investors told Reuters, a situation that places a number of nations in limbo.
The near-freeze underlines the precarious position for many emerging economies that until a month ago had enjoyed booming demand for their debt, defying tariffs and other geopolitical tumult.
One exception this month has been a fund-raising from oil-producing Angola, bolstered by the spike in crude.
“All funding discussions are continuing but with a cautious wait-and-see mode,” Victor Mourad, Citi’s CEEMEA co-head of debt financing, told Reuters.
“There is access for issuers, especially the large solid issuers if needed, but that access comes at a premium,” he said.
AWAITING BETTER DAYS
Emerging nations, led by Saudi Arabia, Mexico and Turkey, had issued debt in January and February at a pace so blistering that first-quarter sales are at a record despite the dearth of issuance in March, according to Stefan Weiler, JPMorgan’s head of CEEMEA debt capital markets.
Sovereign and corporate borrowers in central and eastern Europe, the Middle East and Africa (CEEMEA) had raised an unprecedented $117.5 billion, nearly $3 billion above the first three months of 2025, even before Angola came to the market this week.
Angola is one of the few emerging sovereigns whose credit spreads compressed since the U.S. and Israeli campaign in Iran began on February 28, Mourad said, a sign that investors now demand a smaller premium to lend to the West African oil-producing nation than before the war.
Africa-focused corporate firm Helios Towers also issued debt this week.
For others, the picture is far tougher: investors pulled $3.3 billion from emerging-market debt in the week to March 19, and more than $5 billion out of high-yield corporate bonds, according to Bank of America. The latter marked the biggest outflow since the U.S. tariff shock in April 2025, the bank said.
Credit spreads for the likes of Egypt and Turkey have widened due to the impact the war could have on their economies – as have even those for oil behemoth Saudi Arabia – and the former two countries are also extremely vulnerable to rising energy and food costs.
The JPMorgan EMBI spread between emerging-market dollar debt and U.S. Treasuries widened by 17 basis points, to 268 bps, since late February, while Egypt’s added 44 bps and Turkey widened by 36 bps.
Angola, in the same time frame, narrowed by 39 bps to 504 bps.
The sheer unpredictability of the conflict – with unprecedented attacks on Gulf countries’ energy infrastructure and the closure of the vital Strait of Hormuz – has led to investor caution in taking big positions in most assets.
But several banks have specifically cut their overweight positions for emerging markets.
“The only major shift we have done since the start of the war is increase commodities and reduce our overweight on emerging assets,” said Manish Kabra, multi-asset strategist at Societe Generale.
For Weiler, a few successful transactions in a still sizeable pipeline could spark “pending transactions to emerge en masse.”
But if the uncertainty persists, it could increase the appeal of other avenues of raising money – borrowing directly from lenders through complex transactions such as total return swaps or private placements.
“Private deals typically become more interesting or palatable for borrowers when in moments of market distress,” Weiler said.
STRONG DEMAND WAITING IN THE WINGS
Meanwhile, Weiler and Mourad said investors were buying highly rated Gulf sovereign debt in secondary markets, underlining a potential demand rebound if the conflict calms.
“We do get some reverse inquiries from investors, particularly around higher-rated names – mainly the governments,” Weiler said of the debt of Gulf governments such as Saudi Arabia.
Mourad said the secondary debt markets had been less reactive to the turmoil.
“The fact that investors are buying the current valuations in secondary gives signal that interest continues,” he said, adding: “The widening (of spreads) that we’ve seen is, for some, a good entry point.”
(Reporting by Libby George and Reuters newsroom. Additional reporting by Dhara Ranasinghe and Karin Strohecker; Graphic by Marc Jones; editing by Andrei Khalip)
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