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Sovereign bonds: Winners and losers in 2022

  • In this annus horribilis, winners and losers have both generally been among special situations and distressed cases

  • Top performers: Tunisia, Ethiopia, Costa Rica, Turkey – the only four with positive performance – and Iraq

  • Worst performers (ex-Russia): Ukraine, Pakistan, Ghana, Belarus and Lebanon

Sovereign bonds: Winners and losers in 2022
Stuart Culverhouse
Stuart Culverhouse

Chief Economist & Head of Fixed Income Research

Tellimer Research
10 December 2022
Published byTellimer Research

As part of our traditional end-of-year review ("annus horribilis" – also see our Outlook for next year), we have identified the best- and worst-performing emerging markets sovereign dollar bonds over 2022.

Within EM sovereign dollar bonds, both categories have generally been among special situations and distressed cases, while some oil exporters have also been propelled into the top-performing bracket.

The five best performers this year (to end-November, based on the Bloomberg EM Sovereign USD index) are Tunisia (+4.0%), Ethiopia (+2.6%), Costa Rica (+2.5%), Turkey (+1.6%) – the only four countries that have seen positive returns this year – and Iraq (-0.2%). Costa Rica is perhaps something of a 'normal' outlier.

The five worst performers (excluding Russia, which has been excluded from the index) have been Ukraine (-74%), Pakistan (-52%), Ghana (-46%), Belarus (-44%) and Lebanon (-44%); with Ukraine and Belarus for obvious reasons, Lebanon still in default, and Ghana and Pakistan suffering from distress.

Concerns over Ghana distress and risk of a bond default have been mounting for over a year, and the government finally announced its intention to restructure on 28 November, after announcing its intention to commence formal engagement with the IMF on 1 July.

Unlike Ghana, Pakistan is not seeking to restructure its foreign bonds – and paid off a US$1bn Sukuk on 2 December – although investors have been unsettled by the rise in political uncertainty and the implications of the massive floods.

EM sovereign bonds - best and worst in performers 2022

Having said that, a number of countries that have sold off sharply this year enjoyed a strong performance in November, witnessed by the outperformance of high yield last month.

Among the top performers were Belarus, Sri Lanka, Ukraine, Ethiopia and Ghana.

EM sovereign bonds - best performers in November

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