Emerging Markets – “What Debt Cliff”

by Laura Ehrenberg-Chesler on April 28, 2016

in currencies,Debt,Foreign Markets

Recently Ed Yardeni discussed the Emerging Markets’ debt crisis, or rather the lack thereof.  Some months ago I blogged about this potential debt crisis, and wrote about it as one of our concerns in a quarterly letter to clients.  Mr. Yardeni’s update is welcome news, and may mean this is one worry we can take off the table.

On 4/24, Bloomberg posted an article titled “What Debt Cliff? Easing Emerging Company Defaults Defy Gloom.” It reported: “Just six months after the IMF joined a chorus of regulators and credit-rating agencies warning emerging markets were on the cusp of a wave of corporate defaults, the reverse is taking place.   ‘Rates of non-payment on emerging-market high-yield bonds have fallen every month this year to a four-month low of 3 percent in March, according to data compiled by Bank of America Merrill Lynch. That compares with defaults on U.S. high-yield bonds rising to 4.6 percent. Energy companies account for much of the disparity, with those in emerging markets mostly propped up with public money while U.S. issuers bear the full brunt of weak oil prices decimating revenues, Bank of America said.’ One analyst was quoted saying, ‘The currency mismatch warning has turned out to be the dog that didn’t bite.’ “

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