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Ba-rated and first-time issuers dominated second-quarter issuances as average coupons and tenors dropped to record lows alongside falling interest rates. Proceeds will continue to be directed to supporting companies’ liability management in 2021, but refinancing risk will increase in 2022.
Investment grade sovereign issuance dropped due to narrowing financing requirements but will remain elevated; high-yield sovereign issuance continued to grow capitalizing on improved market conditions.
Physical climate risk is broadly credit negative for sovereigns, particularly for emerging market countries with climate-dependent economic structures and low-quality infrastructure.
Investment in Brazil is growing at the fastest rate in decades, spurring the country’s economic growth, but consumption remains under pressure because of high unemployment and declining wages.
In Latin America, social risks related to inequality and access to basic services drive ESG risks, while in the Caribbean weather-related environmental exposures are drivers.
Regional and local governments in emerging markets generally report weaker access to basic services and higher levels of poverty, inequality and informal employment than their advanced economy peers, which weigh on their growth and financial metrics.