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Covid-19 & EM hard currency sovereigns

It’s all about rating categories when it comes to refinancing.

The question that investors are asking is the extent to which the Covid-19 crisis and ensuing market sell-off will impact the balance sheets of countries and impair their ability to service their debt. We believe the outlook on their solvency and access to liquidity is key to determining which credits can weather the storm.

The JPMorgan EMBI Global Diversified Index universe is now substantially investment-grade (IG) rated, with 57% of the index falling into this rating category, thus lending a robust fundamental profile to the overall index. About 15% of the universe is rated BB, 24% is rated B and only 4% is CCC and below.

JPMorgan EMBI Global Diversified Index by rating category (%)

Source: JPMorgan, May 2020


Looking at the short-term debt maturity of the key EM countries relative to their FX reserves, the short-term maturities look fairly manageable, in our view, with the notable exception of Ecuador (rated CCC), which is one of the more stressed credits in the universe.

Short-term maturity (maturing over next 12mth) vs. FX reserves

Source: Dealogic, Goldman Sachs Global Investment Research. Views as at 27 March 2020. The above is based on certain facts and assumptions.


EM countries have varying access to the market when it comes to refinancing their short-term maturities. Over the past two months, however, we have noted that market access for various EM countries has broadly become correlated to their rating categories, albeit with some differentiation.

In our latest paper, we dig into the EM refinancing landscape examining the impact of Covid-19, the refinancing options available to stressed credits and points of vulnerability across the universe.

Download the PDF