The reach for yield in fixed-income markets continues full-steam ahead. The latest junk issuer to tap into investors desire for income at any and all costs comes courtesy of Tajikistan. Tajikistan just closed on its first ever international bond issue last month. Never heard of Tajikistan? Tajikistan is a tiny landlocked former Soviet republic with a population of about 9 million people. The Tajikistan bonds are rated B- by S&P and come with a coupon of 7.125%.
Junk bond issuance in the developing world is already up 60% over last year’s total and we still have three months to go. This has a familiar ring of something that isn’t going to end well for those involved.
For the prudent investor, a patient approach truly is the only option for fixed income investing in the current environment.
The WSJ has more.
Investors’ thirst for income is enabling governments and companies in some of the world’s poorest countries to sell debt at lower and lower interest rates. Greece, which was on the brink of default a few years ago, issued new bonds this past summer, and the country’s National Bank launched a bond sale Tuesday, marking the return of Greek banks to the credit markets since the country’s sovereign-debt crisis.
Speculative-grade bond issuance in the developing world has hit a record $221 billion this year, according to data from J.P. Morgan Chase JPM 0.75% & Co. and Dealogic, up 60% from the full-year total in 2016.
Buyers reason that the debt pays a healthy yield and carries few immediate risks. The global economy appears robust and emerging-market defaults are low. Bankers say they expect emerging markets to sell tens of billions of dollars in new junk bonds by year-end.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- The Economy Hasn’t Done this in Over a Decade - December 15, 2017
- Is the Fed the Biggest Risk to the Economy? - December 14, 2017
- Household Net Worth Hits a Record High: Is that a Good Thing? - December 13, 2017