The recent volatility in the US Treasury market and resurgence in hostilities between the US and Iran is another reminder to emerging markets issuers that there is little to be gained in waiting to issue bonds.
Notwithstanding the Treasury sell-off and the latest missile exchanges, the primary market for CEEMEA borrowers made a good start this week.
Deals might not be the sort of blockbusters priced before the war began at the end of February but order books are healthy and new issue premiums are not punishing. Investors may not be rushing headlong into new bonds but they still have a good appetite.
Higher Treasury yields do make issuance less appealing for borrowers though, and it is natural for a cost-sensitive issuer to consider pausing plans to wait for less volatile and/or lower rates.
But the primary market is unlikely to become any better than it is now. It is not a difficult time in which to raise new debt. Pakistan, not long ago a real default risk, just printed $3bn at yields that were not eye-watering.
Making the primary market so strong is a cash-heavy investor base looking for high yields. That is not going to change any time soon, at least not without a major global economic downturn or a spike in inflation akin to 2022, none of which is widely expected.
Spreads are at historically tight levels. There is no better illustration of how good the market is for borrowers than Ba3/BB/BB- rated Jamaica, which mandated for dollar bonds this week.
It has 13 year paper at just 111bp over Treasuries and could price new 11 year bonds at a spread below 100bp, a level normally reserved for high quality issuers rated BBB+ or better.
EM bond spreads are not going to tighten, and US Treasury yields are unlikely to fall much. The war may end but it has not had that much of an impact on EM primary market beyond the March pause in issuance.
Therefore, the primary can only get worse if conditions change. Waiting for pricing perfection is a risk with very little pay-off but a huge downside.