Türkiye, Israel to drive surge in 2024 EM bond issuance: JPMorgan

Local government bond issuance across emerging markets (EM) in Europe, the Middle East and Africa is expected to surge to $118 billion in 2024 propelled by robust supply from Israel and Türkiye amid widening budget deficits, JPMorgan strategists stated on Tuesday.

The Wall Street bank estimated net local bond issuance to increase by nearly 40% from $85 billion in 2023 across the region.

Israel was set to see the biggest increase with Treasury bond issuance expected to quadruple to 83 billion shekels ($22.11 billion) this year from $5.06 billion in 2023, said JPMorgan, pointing to the country’s amended budget last week.

Israel, which is more than three months into its declared war against the Palestinian resistance group Hamas, has added $14.7 billion of spending to its 2024 budget.

“We think local investors like pension funds and commercial banks have ample scope to absorb higher net issuance, particularly in Israel, South Africa and Hungary,” JPMorgan strategists said in a note.

Meanwhile, Türkiye’s bond supply was set to double to TL 1,453 billion ($47.99 billion) in 2024 from TL 732 billion in 2023, with earthquake-related spending and municipal elections keeping the country’s budget under pressure.

JPMorgan pointed to Türkiye’s recent pivot to a more conventional monetary policy fueling increased interest from foreign investors in its domestic government bonds.

“We expect foreign interest to increase over 2024, with greater demand helping to bring down increased supply.”

The overall rise in issuance comes as emerging markets are set for their biggest election year in decades and fiscal discipline is in focus as governments tend to increase spending during the preelection period.

Fiscal policies of developing countries have also faced the brunt of external macro shocks ranging from COVID-19 to Russia’s war in Ukraine and elevated global interest rates even as major central banks gradually set foot on the narrative of rate cuts.

At the other end of the spectrum, the Czech Republic’s bond issuance was set to decrease to 182 billion Czech crowns ($7.97 billion) this year from 206 billion Czech crowns in 2023 supported by a tight fiscal budget, while South Africa’s bond supply is expected to be broadly unchanged, the strategists added.