Close Menu
Karachi Chronicle
  • Home
  • AI
  • Business
  • Entertainment
  • Fashion
  • Politics
  • Sports
  • Tech
  • World

Subscribe to Updates

Subscribe to our newsletter and never miss our latest news

Subscribe my Newsletter for New Posts & tips Let's stay updated!

What's Hot

The world’s largest air force with the F-35 fleet in 2025

AI systems learn from many types of scientific information and run experiments to discover new materials | MIT News

Among the most troublesome relationships in healthcare AI

Facebook X (Twitter) Instagram
  • Home
  • About us
  • Advertise
  • Contact us
  • DMCA
  • Privacy Policy
  • Terms & Conditions
Facebook X (Twitter) Instagram Pinterest Vimeo
Karachi Chronicle
  • Home
  • AI
  • Business
  • Entertainment
  • Fashion
  • Politics
  • Sports
  • Tech
  • World
Karachi Chronicle
You are at:Home » Fed rate cuts could restore bond flows to emerging and developing countries
Business

Fed rate cuts could restore bond flows to emerging and developing countries

Adnan MaharBy Adnan MaharJanuary 10, 2025No Comments3 Mins Read0 Views
Facebook Twitter Pinterest Telegram LinkedIn Tumblr Email Reddit
Share
Facebook Twitter LinkedIn Pinterest WhatsApp Email


Capital flows to emerging market and developing countries have gone through several boom-bust cycles in recent decades, many driven in part by external forces such as monetary policy decisions in major industrialized countries. promoted. During the recent global monetary tightening, capital flows to many emerging market and developing economies have proven relatively resilient, benefiting from strong policy frameworks and healthy foreign exchange reserves. However, some of the most vulnerable countries were disproportionately affected by higher external borrowing costs, as evidenced by the sharp slowdown in Eurobond issuance.

Eurobonds are international bonds issued by countries in a currency different from their own, usually the US dollar or the euro. Eurobonds are primarily used in high-risk emerging market and developing countries. Eurobonds circumvent the limitations of often underdeveloped domestic capital markets, allowing borrowers to access overseas capital and diversify their sources of financing. However, unlike local currency bonds, Eurobonds involve currency risk for the borrower, and their interest rates are particularly sensitive to the monetary policy settings of the issuing currency.

This week’s chart highlights a sharp deceleration in net eurobond issuance by emerging market and developing countries, to $40 billion per year from 2022 to 2023, compared to the previous two years. It decreased by 70%. During this period, 26 out of 75 countries saw net outflows of Eurobonds, totaling $58 billion (including countries such as Bolivia and Mongolia). These outflows were due to maturing eurobonds outpacing new issuance, rather than sell-offs by global investors.

The decline in Eurobond flows reflects a combination of tighter external financial conditions and existing vulnerabilities in affected economies, including fiscal and external sustainability challenges. Some countries with stronger fundamentals and policy frameworks have been able to replace foreign currency issuance with local currency debt, partially financed by domestic investors. Many countries responded by cutting investment and squeezing economic growth to reduce imports. Many countries have also exhausted their reserve reserves, which may reduce their ability to withstand future shocks.

Net Eurobond issuance has a strong negative correlation with interest rates in developed countries, which can be approximated by the 10-year US Treasury bond yield. When bond yields in the U.S. and other developed countries fell during the pandemic, borrowers in emerging market and developing countries took advantage of cheaper borrowing costs and issued bonds.

Then, as the Federal Reserve and other major central banks tightened monetary policy, inflows of Eurobonds dried up in many poorly rated emerging and developing economies as borrowing rates reached exorbitant levels. Despite the widening of the interest rate differential in favor of emerging market and developing countries, Eurobond issuance declined, pointing to the importance of external interest rates for this type of capital flow.

Global interest rate conditions are starting to become more favorable for borrowers this year, as central banks in several major advanced economies have moved to ease monetary policy. This helped eurobond issuance recover to $40 billion in the first quarter of 2024 as countries such as Benin and Ivory Coast return to the market. The start of the Fed’s easing cycle could support a further recovery in eurobond issuance and a broader revival of capital flows to emerging market and developing economies.



Source link

Share. Facebook Twitter Pinterest LinkedIn Reddit WhatsApp Telegram Email
Previous ArticleThe Guardian’s take on Magnus Carlsen’s power play: Check out the chess ruler in style | Editorial
Next Article Bank of England Agenda for Research, 2025-2028
Adnan Mahar
  • Website

Adnan is a passionate doctor from Pakistan with a keen interest in exploring the world of politics, sports, and international affairs. As an avid reader and lifelong learner, he is deeply committed to sharing insights, perspectives, and thought-provoking ideas. His journey combines a love for knowledge with an analytical approach to current events, aiming to inspire meaningful conversations and broaden understanding across a wide range of topics.

Related Posts

Kodak Vision3 Film Stock Enhancement – New AHU Design

September 1, 2025

Cryptocurrency Live News & Updates: Vaneck proposes SolanaETF for traditional investors

August 21, 2025

The paint sector slows down: Early monsoons and price war hit revenues in June quarter, revival of corporate eye celebrations

August 17, 2025
Leave A Reply Cancel Reply

Top Posts

20 Most Anticipated Sex Movies of 2025

January 22, 2025452 Views

President Trump’s SEC nominee Paul Atkins marries multi-billion dollar roof fortune

December 14, 2024122 Views

How to tell the difference between fake and genuine Adidas Sambas

December 26, 202485 Views

Alice Munro’s Passive Voice | New Yorker

December 23, 202474 Views
Don't Miss
AI September 25, 2025

AI systems learn from many types of scientific information and run experiments to discover new materials | MIT News

Machine learning models can speed up discovery of new materials by making predictions and proposing…

Among the most troublesome relationships in healthcare AI

Does access to AI become a fundamental human right? Sam Altman says, “Everyone would want…”

Google’s Gemini AI is on TV

Subscribe to Updates

Subscribe to our newsletter and never miss our latest news

Subscribe my Newsletter for New Posts & tips Let's stay updated!

About Us
About Us

Welcome to Karachi Chronicle, your go-to source for the latest and most insightful updates across a range of topics that matter most in today’s fast-paced world. We are dedicated to delivering timely, accurate, and engaging content that covers a variety of subjects including Sports, Politics, World Affairs, Entertainment, and the ever-evolving field of Artificial Intelligence.

Facebook X (Twitter) Pinterest YouTube WhatsApp
Our Picks

The world’s largest air force with the F-35 fleet in 2025

AI systems learn from many types of scientific information and run experiments to discover new materials | MIT News

Among the most troublesome relationships in healthcare AI

Most Popular

10 things you should never say to an AI chatbot

November 10, 20040 Views

Character.AI faces lawsuit over child safety concerns

December 12, 20050 Views

Analyst warns Salesforce investors about AI agent optimism

July 1, 20070 Views
© 2025 karachichronicle. Designed by karachichronicle.
  • Home
  • About us
  • Advertise
  • Contact us
  • DMCA
  • Privacy Policy
  • Terms & Conditions

Type above and press Enter to search. Press Esc to cancel.