The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Emerging market debt: Punishing original sin

Emerging-market corporate debt – the fastest-growing asset class in the world – faces its first stress test, thanks to a surging dollar and rising US yields. As developing countries square up to another possible debt crisis, an increasingly inevitable round of corporate defaults threatens to swamp an illiquid market.


For the emerging-market debt community, it’s back to the future. Fears over the debt-servicing capacity of Chinese property firms, Ukrainian corporates and Latin American oil producers are rocking the asset class. 

A perfect storm – a relentless surge in the dollar as well as the death of both the commodity super-cycle and US monetary stimulus on steroids – threatens the health of EM economies. Defaults are staging an uptick as the spectre of a cost-of-capital crisis for large swathes of the emerging market private sector looms. The key question is whether emerging markets face a systemic crisis, or whether corporate defaults on external bonds can be contained.

The backdrop is foreboding. The emerging market bond equivalent of ‘original sin’ – excessive dollar liabilities serviced with depreciating local-currency revenues – has returned with a vengeance. Leading emerging market currencies have plummeted by 20% to 40% against the dollar in recent months. 

In turn, the cost of servicing dollar liabilities has jumped. New issue volumes for Ceemea are at post-crisis lows, despite the global yield famine. The majority of external bond deals launched in 2014 are trading below their new issue price.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree