As a greater range of data points catch the attention of emerging markets bond traders, the windows of opportunity for issuers are are becoming narrower. As a result, issuers will have to become faster and more decisive to have any hope of success.
The accusation against borrowers in emerging markets that they are slow and dithering in their approach to the international bond markets is far from a new one.
The combination of multi-layered bureaucracy, lack of experience, and what appears, to more seasoned market participants, to be an unreasonable focus on a somewhat arbitrary number can mean that weeks, often months, and sometimes even years can elapse between an issuer deciding to sell a new bond and actually printing it.
And that’s in a good market, often even for non-debut issuers.
This is not a good market. Time is not on the side of issuers. With every month that goes by, as US Treasury yields rise, so do their funding costs. And the windows in which the market is stable enough to price a bond have become much smaller.
Over the last year, EM issuers, investors and bankers have been especially cautious in the run up to US Federal Open Market Committee meetings. They’ve known that, given concerns around the tapering of the Fed's quantitative easing programme, there is a period just after these meetings where investors may throw their toys out of the pram.
But there are only eight of these scheduled meetings per year. They weren’t too taxing to navigate around.
More recently, however, as the focus on the pace of monetary tightening has intensified, attention has naturally turned to those factors that are thought to feed into FOMC decisions, as market participants look to get ahead of the curve.
This is reflected in the fact that, in the last couple of weeks, there have been US Treasury sell offs after a US jobs data release and then an inflation print. The reverberations shook EM bonds.
Suddenly, EM desks are informing clients about a shed load of other dates in the calendar that, as of now, are no-go zones for new issues.
Add to that massive, broad sell offs in EM bonds caused by geopolitical problems such as the Russia/Ukraine crisis, and the windows for deals start to look more like cat flaps than luxurious bifold doors.
It has always been advantageous for borrowers to be flexible and responsive if they want to print a successful new issue. But in this market, it is no longer merely an advantage — it is a prerequisite.