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About 27 percent of low-income countries have been shut out of the bond market as the banking industry’s chaos has left investors shunning risk, especially in the form of high-yield debt, the Financial Times reported.

The 27 nations’ bonds have yielded 9 points or higher above those of U.S. treasury securities, Goldman Sachs noted. 

For example, Bolivia’s government bonds are offering 14 percent interest; Egypt’s carry an 11-percent yield.

The higher the yield, the riskier the investment. 

Emerging nations have issued $54 billion in bonds during this year’s first quarter, 60 percent more than a year earlier, but 70 percent of the offerings came in January before the banking crisis struck. 

In the current environment, 9 points is too high a bar for most bond buyers, Goldman Sachs said in a note.

The banking sector’s current instability “has two effects on emerging market high-yielders,” David Hauner, emerging market strategist at Bank of America, told the FT.

“The positive is that it might bring down inflation and interest rates,” he said. “At the same time, no one is going to buy a high-yield bond when you don’t know what’s going to happen to the financial markets.”

The market has discouraged Kenya and Nigeria from issuing new bonds, even though their yields are less than 9 points above U.S. treasuries. Even oil-rich Bahrain has scrapped a bond sale.

Countries unable to sell bonds are more likely to resort to the International Monetary Fund for help, the FT noted.

The inability to enter the bond market “will push countries to take tough measures at a time when inflation is already high and they’re struggling with low growth,” Sara Grut, emerging market credit strategist at Goldman Sachs, said to the FT.

TREND FORECAST: As we warned in Emerging Nations Fall Deeper Into Debt (28 Feb 2023), emerging nations will remain a speculative or short-term gamble to be chosen case by case.

Now, with oil prices rising and supplies tightening, the financial pressures on already wobbly nations is even greater and the risk of financial collapse higher. 

Current high prices for consumer staples and rising interest rates also increase the chances that those nations will fall prey to social unrest, radical political movements, and populist or socialist governments.

As Gerald Celente often says, “When people lose everything and have nothing left to lose, they lose it.” Because we forecast a steep economic decline, our Top Trend for 2021, New World Disorder will escalate as people take to the streets to protest lack of basic living standards, government corruption, crime, and violence. 

It will also escalate the refugee trend which in turn will support anti-immigration, anti-establishment populist movements in nations where refugees seek safe havens.

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