In 2023, emerging economies are rapidly turning to the euro bond market, indicating a growing interest in this currency amid dollar depreciation.
Increase in Euro Bond Issuance
According to Bloomberg, developing economies sold €89 billion worth of euro-denominated bonds from January to July 2023—the highest total for that timeframe since 2014. This includes €21 billion from Poland and Romania. Poland has also launched its first green bonds since 2017, while Bulgaria secured €3.2 billion following a credit rating upgrade related to its entry into the eurozone.
Countries Moving Away from the Dollar
Romania issued euro bonds for the third time this year after successful elections. In Asia, South Korea and China also tapped the euro bond market. Chile has also joined the trend. All these countries are looking to reduce their exposure to the USD. Matthew Graves, a portfolio manager at PPM America, noted: "We have been more active in looking for opportunities outside of US dollars credits."
Reevaluation of Dollar Strategy by Major Players
As the dollar weakens, the appetite for diversification is growing. Bank of America is betting on Romania's 2044 euro bonds, while JPMorgan analysts highlight Poland, Hungary, Mexico, and Morocco as attractive opportunities for investors. David Robbins of TCW Emerging Markets Group pointed out that investors still see value in emerging markets: "The relative yield advantage you're getting in EM continues to look attractive."
As the dollar loses its appeal, emerging economies are ramping up their efforts to issue euro bonds, signaling a shift in market sentiments amid uncertainty.
