Emerging market debt trading volume rises 9% in 2019

Emerging market debt trading volume rises 9% in 2019

Bonds Debt Capital Markets Fixed Income Funds Argentina Brazil China India Mexico Latin America

Emerging market debt trading volumes totaled $5.34 trillion in 2019, a 9% increase over the prior year, according to survey released on Monday.

The fourth quarter of last year, where $1.33 trillion in bonds changed hands was a 25% increase over the same period in 2018. However, compared to the immediate third quarter volumes fell 6% from $1.42 trillion, EMTA, the emerging markets debt trading and investment industry trade association said in a statement.

“The year was marked by an abrupt turn in US FOMC interest rate policy, with a series of US interest rate cuts following 2018’s hikes, with generally strong EM debt performance,” EMTA said.

“Analysts noted that the more recent outbreak of COVID-19 has led to dramatic reductions in both US rates and 2020 EM growth forecasts,” the association added.

Mexico’s local and Eurobond volume combined was the most of any domicile at $972 billion, an 18% increase over 2018. Mexican debt volumes made up 18% of overall volumes. The second most traded domicile was Brazil, with 15% of overall trading volume for the year. Brazilian local and Eurobond trading volumes totaled $781 billion, a 26% increase over 2018.

While Mexico and Brazil are perennially among the most widely traded instruments, Indian local and Eurobond debt surged by 41% in 2019 to $514 billion and putting it in third place. India was followed by China at $352 billion and Argentina at $251 billion.

Eurobond trading volumes gained 22% for the year, hitting $2.275 trillion. Out of that total, 57% of Eurobond activity involved sovereign issues at $1.288 trillion in volume. This represented slight decline in overall share of trading volumes versus 2018.

On the corporate side of the market, Eurobond trading volumes touched $921 billion last year, roughly 40% of all Eurobond market activity. Sovereign Eurobond activity accounted for 24% of the overall survey volume, while corporate trading was 17% of total turnover.

Argentina’s 2028 bond was the most frequently traded, at $16.7 billion in volume. Mexico’s 2029 was second in volume at $16.5 billion. Petrobras’ 2049 bond had $14.5 billion in turnover and also represented the most actively traded emerging market corporate debt instrument in 2019. Rounding out the top five were Argentina’s 2021 bond at $14.4 billion and Argentina’s USD Par bond with $14 billion in volume.

Mexican debt instruments were the most widely traded in the local markets last year, with $697 billion changing hands. The turnover in the local markets made up 57% of all reported volumes, or $3.058 trillion. The local market volumes rose 2% over 2018. In the local markets, Brazilian debt instruments accounted for $522 billion, followed by India at $464 billion, South Africa with $174 billion and China at $167 billion.

The survey compiled data from 44 leading investment and commercial banks, asset management firms and hedge funds and includes trading volumes from over 90 emerging market countries.