The new normal for investors has become the reality of negative yielding debt. Not only is this now a mainstay of many European Government Bond markets but investment grade debt, adjusted for inflation, is now also beginning to move into the same category. Paying a borrower to own their credit risk is something many emerging market borrowers would dearly wish for, but many are benefitting already from the absolute fall in global interest rates. This, plus the continued demand from investors for positive yields has gone some way to mitigate some of the Covid 19 related risks of lower GDP, lower tax revenue and higher fiscal deficits. As always, not all emerging market borrowers are equal and understanding both the economic and political dynamic has become more important that ever.
Bloomberg is the source of the data.