New bond issuance by emerging markets increased in 2002, in spite of substantial volatility in global markets, but still remains well below the peak seen prior to the 1997 Asian financial crisis.

In a report put out by Standard & Poor's, the new bond issues of US$98.9 billion were recorded in the period covering Jan.1 to Dec. 13 this year; a 21% increase compared with US$81.9 billion recorded in full year 2001.

Issuance volumes were higher in almost every month compared with a year ago. The broadening of credit spreads in the more advanced bond markets resulted in investor risk aversion, with adverse implications for cross-border emerging-market borrowers. For example, U.S. speculative-grade corporate bond spreads reached a record high of 1011 basis points in early October. Still, investors clearly adopted a discriminatory approach towards emerging-market bond issues, favoring bonds from certain sectors and regions over others.

A similar approach is likely to remain in place next year, until the strength of the current global economic cycle reasserts itself in the second half of next year and capital flows to emerging markets pick up steam.

To view the full report click on "Domestic Borrowing Buoys Corporate Emerging-Market Issuance Amid Cross-Border Volatility" in the Standard & Poor's Reports box at www.riskcenter.com.