RED ALERT: Emerging Market Debt-Linked Note Sales Plunge 89% On China, Fed; Emerging Market Equity Fund Outflows This Year Surpass Whole Of 2013

Saturday, February 8, 2014
By Paul Martin
February 7th, 2014

Emerging Market Debt-Linked Note Sales Plunge 89% on China, Fed

Sales outside the U.S. of structured notes tied to emerging-market nations’ debt fell 89 percent in January from a year earlier on concern that the countries are at risk as the Federal Reserve slows its bond-buying program.

Banks sold $53.7 million of securities last month linked to the debt of six countries including Brazil, Ukraine, and Nigeria, down from $477.1 million a year ago, according to data compiled by Bloomberg. While the investments typically offer higher yields than those tied to developed-market sovereign debt, the countries have a higher risk of defaulting.

Investors avoided notes linked to the government and treasury obligations of nations such as Russia, which canceled a bond auction for the second straight week after yields on its bonds maturing in 2028 climbed to record highs. Currency and stock markets have fluctuated as manufacturing slowed in China and the U.S., and the Fed announced it would further trim its monthly bond-buying program.

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