Foreign dollar bond issuance increasing

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Not a lot yet, but $65 billion is something and counts as USD deficit spending as they are presumably borrowing to spend.

The Fed swap lines outstanding of something over $600 billion probably do not yet represent ‘borrowing to spend’ but there is no way to tell from current data.

Both, however, can be considered ‘selling USD’ in the FX markets, with the swaps preventing a possible forced dollar buying more than driving a selling of dollars.

‘Original Sin’ Returns as Emerging Markets Plan Bonds (Update3)

By Lester Pimentel

Dec. 31 (Bloomberg) — Developing nations plan to sell the most dollar-denominated bonds since 2005, reversing a shift into local debt, as commodities prices fall, foreign reserves diminish and emerging-market currencies weaken.

International sales may rise 68 percent to $65 billion next year, according to estimates by ING Groep NV. Mexico raised $2 billion in a Dec. 18 offering. Peru’s Finance Minister Luis Valdivieso met with investors in New York, Boston, London and Madrid this month to drum up interest for the country’s first foreign sale in almost two years.

Governments are growing more dependent on international markets after the six-month drop in raw materials reduced earnings from exports and caused budget deficits to widen. Dollar borrowing will increase foreign-exchange risk, a pattern that led countries across Latin America to default in the 1980s, saidRicardo Hausmann, director of the Center for International Development at Harvard University in Cambridge, Massachusetts.

“Countries will be forced to issue in dollars,” said Hausmann, a former Venezuelan planning minister who called developing nations’ reliance on foreign markets the “original sin” in a 1998 article in Foreign Policy magazine. “Debt structures will deteriorate again.”


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