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Aiming bonds at Emu

Bonds are developing to suit the most sophisticated global investor. Sovereign debt issuance is increasing in emerging markets, European bond markets are diverging with the approach of monetary union, and the EIB's new further-issue clause could give debt-trading in euros huge liquidity. James Featherstone reports, starting with emerging markets

The choice of sovereign paper available to emerging market debt investors is getting larger. Starting with issues such as the Lebanon global bond issued two years ago, countries such as Estonia, Kazakhstan, Moldavia and Oman have issued debt on the international markets for the first time. And a debut £50 million floating-rate note issue is expected in the first half of this year from Sri Lanka.

Although the large-scale emerging market issues in the last few years have come from Mexico and Argentina ­ and have continued so far this year with large issues from both countries in January ­ new sovereign issuers have started a trend for accessing international capital markets. Some emerging market countries are engaged in a process of debt restructuring; two recent bond issues that fall into this category are those from Croatia and Panama issued on the Euromarkets in early February. Others are governments that have not been in a position to issue debt in such a way before.

"In the current environment the market is very receptive to new names with improving credit ratings and well-marketed stories," says Richard Luddington, head of emerging market debt syndicate at JP Morgan in London.

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