Emerging market bankers estimate that the market is pricing in around a 30% chance of a US rate rise this month, and a 60% chance it will happen before the end of the year.
So if the Fed does not raise rates on Thursday, there is widespread hope of a rally in EM bonds as pressure is taken off EM currencies that are already weak after a whipping this year.
This is when bankers are expecting EM issuers to pounce on a print. But the same bankers are also concerned that rally won’t come, or at least won’t be as strong as these issuers are hoping, leading to them once more find an excuse to dither on deck before diving in.
But if issuers want or need funding that they have not yet taken care of this year, or indeed pre-funding for 2016, they would be foolish to wait.
This quarter is always a short one as the market typically survives little longer than with the Thanksgiving turkey, and we’re already halfway through September with only three euro benchmarks for Poland, Eesti Energia and Slovenia having been printed from CEEMEA over the last month. The last dollar benchmark was Zambia on July 24, according to Dealogic data.
The reasons for that lack of supply have been well broadcast — summer slowdown, weak local currencies, miniscule oil prices, sanctions against Russia, and volatility in China. It has been a hotchpotch of horrors.
This week might have provided a good window, but few issuers wanted to be in the market with a dollar bond before the Fed took to the stage, though Ethiad did manage to launch its $500m structured deal on Tuesday.
Assuming that the market remains stable and the Fed does not raise rates and spark a sell-off, next week is likely to be the prettiest looking window EM has seen in a while. Issuers would be wise to pull themselves together and use it, regardless of whether the market pulls itself tighter.