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Corporates from Mexico, Turkey and other developing nations have borrowed in dollar bond markets this year at an average 5.828% yield, versus the 6% demanded of sovereigns for similar-maturity debt, according to Bloomberg’s analysis of new bond issues through Feb 4.
In the case of Ukrainian agri-business MHP SE, investors were willing to accept yields several percentage points below that of the sovereign.
Compare that to the same period in 2024 and 2025, when corporates paid 7%-plus on average to sell debt – significantly more than the yield on new government bonds, data show.
The perception that corporates might be considered safer than their countries of origin has been gaining acceptance in the United States and Europe, where conglomerates like Microsoft Corp and Airbus SE often boast higher credit ratings and lower borrowing costs than their debt-laden governments.
Yet, in the developing world, investors have been slower to separate corporate risk from sovereign.
Emerging-market companies have long been “guilty by association”, according to Charles Gelinet, a portfolio manager at J Stern & Co in London.
“When you dig under the bonnet, these are often global companies, they’ve got diversified sources of revenue, but they’re effectively penalised for their postcode.”
That could be changing for some companies.
Gelinet is among the investors who bought the recent bond from MHP, a company that exports grain, oil and poultry products while operating in war-ravaged Ukraine.
It paid a 10.5% coupon for debt maturing 2029 – about 650 basis points below the Ukraine government’s four-year bond.
Orders for the sale topped US$2.25bil.
Unlike Ukraine’s government which defaulted in 2022, MHP remained current on its bonds.
“Despite everything that’s happened, they’ve paid their coupons,” Gelinet said, explaining his decision to buy the bond at a far lower yield to the sovereign.
Investors like him argue that many emerging companies are skilled at navigating crises such as sovereign debt defaults and currency collapses.
Exporters actually benefit when local currencies weaken, thanks to their domestic cost base.
And unlike governments, corporates can quickly cut capital expenditure and other spending during tough times.
“Companies can survive even when governments fall,” Manuel Mondia, a portfolio manager at Aquila Asset Management, said, pointing to Argentina with its multiple defaults and government changes.
“If you buy the sovereign in Argentina, the political risk can kill you, but their corporations will keep existing and people are willing to pay a premium for that.”
Telecom Argentina SA reaped that premium on Jan 14 when it raised US$600mil in 10-year bonds at a 8.625% yield, even as similar-maturity sovereign securities yielded about 9%.
The company held firm through the government’s 2020 default.
So far in 2026, emerging corporate debt has outperformed, with yield spreads falling below 200 basis points – close to the lowest since the 2008 crisis.
On average, the sector has returned 0.8%, compared to 0.5% on sovereign debt, Bloomberg indexes show.
That reverses last year’s picture when returns lagged government bonds.
Some investors expect the rally to continue, especially if a busy electoral calendar across Latin America and Asia tempts governments to raise spending, worsening their public finances.
While debt-to-output ratios in the developing world are still far lower than in the Group-of-10 nations, fiscal backsliding still poses a risk.
“Emerging-market countries remain in a high‑debt equilibrium, with debt ratios elevated relative to pre‑Covid-19 norms and unlikely to fall materially in the near term,” said Arnaud Boue, a portfolio manager at Bank Julius Baer in Zurich.
Meanwhile, a key corporate leverage measure – the net debt-to-earnings before interest, taxes, depreciation and amortisation ratio – averages about 2.3 times for companies on MSCI’s emerging stock index, which Boue described as “healthy”.
For investment-grade firms, it’s half that level, he added.
Still, sudden regulatory changes and business disruptions are, as a rule, more frequent in poorer nations.
That means the so-called sovereign ceiling, which caps companies’ credit scores and borrowing costs below that of the government, will remain a powerful barrier.
Mauro Favini, senior portfolio manager at Vanguard Capital Management, is among those who sees the ceiling staying in place, especially for domestically focused corporates.
He acknowledges that top-tier names with hard‑currency cash flows can sometimes trade below the sovereign yield curve, but sees “inside-curve prints as idiosyncratic opportunities, not a new regime for the asset class”.
“In risk‑off regimes, the sovereign typically reasserts itself as the effective ceiling,” Favini said. — Bloomberg
Disclaimer
The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile. The information contained in this report is prepared from data believed to be correct and reliable at the time of issuance of this report. While every effort is made to ensure the information is up-to-date and correct, Bond and Sukuk Information Platform Sdn Bhd (“the Company”) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information contained in this report and accordingly, neither the Company nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
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