Developing countries took record amounts of capital markets in the first half of the year even after warnings of central bankers that “the euphoria of the debt markets” can cause big problems in the future. In the first half of the volume sold in developing countries government bonds reached 69.47 billion USD. This is an increase of fully 54% over the same period last year. This increase becomes 2014 record emissions government debt made by emerging economies. The figures do not include emissions of Chinese government debt, as it is not available on international markets.
The total volume of debt issues in developing countries remains small compared with that of developed economies, which have been placed 157.6 billion USD in the first six months of 2014.
Years of ultra-low interest rates and unconventional monetary policy measures in the world after years of financial crisis pushed down bond yields globally. This fact has prompted investors to seek riskier assets in the bond market. The accommodative monetary policy provide sufficient incentives for countries to raise cash.
In April, Greece emitted debt for 20 billion EUR to the first issuance after the period in which the indebted country sparked the debt crisis threatening the stability of the Eurozone. Cyprus is back on the international market only a year after the banking collapse, left to fill the financial gap of 10 billion USD. In mid-June Kenya set a record for the highest debut in the international bond markets on the African side. Kenya placed bonds worth 2 billion USD, and the issue was oversubscribed four times. Ecuador lost access to international capital markets after failing to make payment on its debt in 2008, successfully selling new debt to 2 billion USD.
Some analysts fear that if interest rates in the developed world begin to rise, will repeat last year’s situation in which only calls for the withdrawal of unconventional monetary measures by the Fed triggered outflows from developing countries.
Last month, the Bank for International Settlements warned about the dangers of rising debt levels in the world. For some countries, the room for maneuver is narrowing in the presence of low interest rates, experts found the financial institution.