Emerging market governments are selling foreign-currency bonds at an unprecedented rate in 2026, with total sovereign issuance reaching around $200 billion year-to-date. This surge in borrowing is occurring despite challenges such as elevated global borrowing costs, a strengthening U.S. dollar, and the geopolitical fallout from the Iran war. Countries are issuing these bonds to refinance existing debt, diversify their funding currencies, and, in some instances, address war-related fiscal and external pressures.
Through August 2026, emerging market sovereigns have issued $190 billion in foreign bonds, an increase from $160 billion during the same period last year. This robust issuance is supported by strong investor demand, even as U.S. Treasury yields have risen. The spread on JPMorgan's benchmark index for emerging market foreign-currency bonds has narrowed to 2.2 percentage points over U.S. Treasuries, down from 2.6 percentage points in 2025, indicating a resilient risk appetite among investors. Jonathan Fortun, a senior economist at the Institute of International Finance (IIF), suggests that investors increasingly view emerging markets as a safer asset class, signaling a sustained improvement.
Recent major issuers include Qatar, which sold $3 billion in bonds at yields between 5.3% and 5.5%, and Saudi Arabia, which raised over $3 billion through sukuk issuance. Pakistan also sold $3 billion in five-year and 10-year bonds at yields of 7% to 8%, its largest ever U.S. dollar debt deal, to boost its international reserves above $20 billion and support its credit ratings. Countries like Turkey, Kazakhstan, and the Dominican Republic are also expected to issue dollar and euro bonds. Investors like Yvette Babb of William Blair Investment Management note continued inflows into emerging market debt, driven by steady global growth and increased allocations from asset owners.
