As conflict in the Middle East pushes oil prices higher and unsettles global bond markets, emerging market sovereigns are watching two things closely: the path of global yields and the debt coming due on their own refinancing calendar. They cannot set the price of borrowing. But can they choose the timing? That question goes to the heart of sovereign debt management in volatile global markets.

Emerging market debt has surged since the pandemic, renewing concerns about rollover risk and fiscal vulnerability (Rogoff et al. 2021). More broadly, recent evidence suggests that dollar use in international debt issuance has returned in waves rather than followed a one-way trend (Pradhan et al. 2026). Yet most research on sovereign borrowing in emerging markets still focuses on debt stocks: how much governments owe, in what currency, and to whom (Bolton et al. 2023). Debt stocks matter, but they are the cumulative outcome of many individual issuance decisions about when to borrow, how much, at what maturity, and in which currency. These are the choices debt managers make, and they are much harder to study because the underlying issuance data remain limited (Presbitero et al. 2016).

In this column, we shift attention from debt stocks to debt issuance. Using a novel auction-level dataset covering more than 75,000 sovereign bond issuance events across 20 emerging market economies, we show that local-currency and foreign-currency issuance follow fundamentally different logics. Local-currency issuance is mostly driven by refinancing needs, as maturing debt often has to be rolled over. Foreign-currency issuance is more strategic, responding to global financial conditions, investor sentiment, and terms-of-trade shocks. Looking at issuance at the auction level also helps uncover a feature that standard bond databases often miss: governments frequently reopen existing bonds rather than issue entirely new ones, so the remaining tenor at the time of issuance matters more than original maturity for understanding how debt portfolios are actually managed.

A new auction-level dataset

To study these issuance decisions directly, in Wong et al. (2026) we assemble a comprehensive issuance event-level dataset that merges official national publications with commercial databases. The dataset covers 20 emerging market economies across Asia, Emerging Europe, the Middle East, Africa, and Latin America over the period 2000–2023. It comprises over 75,000 issuance events – including more than 20,000 inaugural issues and 55,000 reopenings – and captures detailed information on coupon structure, maturity, amounts issued, auction yields, and prices.

Total bond issuance on a flow basis grew from roughly $500 billion in 2000 to nearly $3.5 trillion by 2023. China accounts for a rapidly increasing share: less than 10% of the sample total in 2005, but more than 45% by 2023 (Figure 1). Other large issuers include Egypt ($456 billion in 2023), India ($366 billion), Brazil ($265 billion), and Mexico ($223 billion).

Figure 1 Total government bond issuance

Notes: This figure plots the evolution of total government bond issuance (in billion US dollars) over the period 2000-2023. The orange bars show Chinese central government bond issuance and the blue bars show central government bond issuance by the other 19 countries in our dataset.

The majority of issuance is in local currency and has a maturity at issuance of five years or less, though this varies considerably by region. Asian emerging markets rarely issue in foreign currency, and about half of their local-currency issuance is long-term. In Emerging Europe and Africa, by contrast, most local-currency debt has short initial maturities. Foreign-currency bonds, which ranged between 20% and 30% of total issuance in the early 2000s, fell below 10% around 2006–2008 before recovering to 20–30% after the Global Crisis (Figure 2).

Figure 2 Composition of bond issuance

Notes: This figure illustrates the evolution of the composition of central government bond issuance. The top left panel includes all bonds, the top right shows only foreign currency bonds, and the bottom left focuses on local currency bonds. The six panels in the bottom right corner present the same information disaggregated by region. Light orange bars indicate the share of foreign currency bonds with a maturity of less than five years; dark orange bars represent long-term foreign currency bonds; dark blue bars show medium-term local currency bonds; and light blue bars reflect long-term local currency bonds

Local-currency issuance is driven by refinancing needs

In any given year, a treasury must finance the budget deficit and roll over maturing debt by issuing new bonds, adjusting its stock of bank loans, or drawing down cash reserves. We estimate how bond issuance responds to these financing needs, distinguishing between local-currency (LC) and foreign-currency (FX) instruments.

For local-currency bonds, issuance tracks refinancing needs very closely. The model fits tightly, with an R-squared of 0.95. Maturing foreign-currency debt, by contrast, has essentially no effect on local-currency issuance. The budget balance has a negative but modest association with local-currency issuance volumes, consistent with deficits being temporarily financed through non-bonded debt and cash management.

When we decompose issuance further by maturity, we find that, on average, longer-term local-currency bond issuance responds not only to maturing bonds of the same type but also to maturing bills, consistent with a gradual lengthening of the local-currency debt portfolio.

The strategic nature of foreign-currency issuance

The picture for foreign-currency bonds is strikingly different. While maturing foreign-currency debt does predict new foreign-currency issuance, the relationship is weaker and the overall model fit is weaker. This suggests that foreign-currency issuance is not primarily about rolling over existing obligations but reflects more strategic considerations.

Several patterns support this interpretation. Countries with higher foreign investor participation in their domestic bond markets issue less in foreign currency, suggesting that the ability to attract international capital into local-currency markets reduces the need to borrow abroad. Higher US interest rates and increased global uncertainty (proxied by the VIX) are both associated with lower foreign-currency bond issuance, consistent with the idea that emerging market issuers pull back from international markets when financial conditions tighten.

The maturity structure of foreign-currency bonds also responds to terms-of-trade shocks. When commodity import prices rise, an adverse shock for many emerging markets, foreign-currency maturities shorten, precisely when rollover risks are most elevated. Rising export commodity prices, conversely, are associated with longer foreign-currency tenors.

Using quarterly data and a specification that interacts a foreign-currency dummy with measures of global conditions – the Global Financial Cycle index of Miranda-Agrippino and Rey (2020), the VIX, and expected US ten-year Treasury yields – we find a consistent pattern: favourable global conditions are associated with relatively more foreign-currency bond issuance. A one standard deviation improvement in global financial conditions is associated with an increase of about 0.6 percentage points of GDP in foreign-currency issuance, or roughly one-sixth of the average difference in issuance volumes between currencies when global conditions are at their mean.

When we decompose this effect, the results suggest that local-currency issuance decreases during good times while foreign-currency issuance remains roughly constant. In other words, favourable global conditions increase the foreign-currency share of issuance, but emerging markets do not appear to go on a borrowing spree. The shift is compositional rather than expansionary. The motivation to tap foreign markets during favourable conditions appears to dominate the potential effect of increased foreign investor participation in local-currency markets.

Policy implications

Our findings have several implications for debt management.

First, they underscore the importance of developing deep domestic bond markets as core infrastructure for macroeconomic resilience. Local-currency borrowing can be backstopped by the domestic central bank, eliminates currency-induced balance-sheet risk, and provides greater room for countercyclical fiscal policy (Eichengreen et al. 2023, Onen et al. 2025). The strong mechanical relationship between maturing local-currency debt and new issuance confirms that these markets function as reliable funding infrastructure.

Second, foreign-currency borrowing can serve a useful tactical purpose – allowing governments to lock in favourable terms during periods of low spreads and high risk appetite – but debt strategies should not presume permanent access to international markets. Medium-term plans need to incorporate contingency planning for sudden stops. Commodity exporters face particular vulnerabilities, as adverse terms-of-trade shocks are associated with shorter foreign-currency maturities, reinforcing the importance of using commodity windfalls to lengthen maturities and build liquidity buffers.

Third, our work highlights persistent gaps in public reporting of sovereign debt. Substantial inconsistencies remain in how countries disclose issuance details. Governments should prioritise publishing standardised, high-frequency data on debt composition, broken down by currency, maturity, and holder type, alongside clear refinancing calendars (Manger et al. 2025). International organisations can play a pivotal role by promoting harmonised reporting standards, enabling more rigorous evaluations of debt sustainability.

References

Bolton, P, M Gulati and U Panizza (2023), “Sovereign Debt Puzzles”, VoxEU.org, 30 March.

Eichengreen, B J, R Hausmann and U Panizza (2023), “Yet It Endures: The Persistence of Original Sin”, Open Economies Review 34(1): 1–42.

Manger, M S, D Mihalyi, U Panizza, N Rescia, C Trebesch and K L Wong (2025), “Africa’s Domestic Debt Boom: Evidence from the African Debt Database”, CEPR Discussion Paper No. 20747.

Miranda-Agrippino, S and H Rey (2020), “U.S. Monetary Policy and the Global Financial Cycle”, The Review of Economic Studies 87(6): 2754–76.

Onen, M, H S Shin and G von Peter (2025), “Overcoming Original Sin: Shedding New Light on Uneven Progress”, Economic Policy 40(122): 575–620.

Pradhan, S-K, E S Prasad, E Takáts and J Temesvary (2026), “Dollarization Waves: New Evidence from a Comprehensive International Bond Database”, NBER Working Paper 34942.

Presbitero, A F, D Ghura, O S Adedeji and L Njie (2016), “Sovereign Bonds in Developing Countries: Drivers of Issuance and Spreads”, Review of Development Finance 6(1): 1–15.

Rogoff, K, F Ohnsorge, C Reinhart and M A Kose (2021), “Developing Economy Debt after the Pandemic”, VoxEU.org, 3 November.

Wong, K L, M S Manger and U Panizza (2026), “Determinants of Sovereign Bond Issuance in Emerging Markets”, CEPR Discussion Paper No. 21251.