JPMorgan warns of borrowing surge as emerging markets turn to debt lifeline.

Emerging-market governments are set to flood global debt markets in the months ahead, with JPMorgan raising its forecast for sovereign bond issuance amid mounting fiscal pressures. The revised outlook underscores a troubling reality: while investors may welcome fresh supply, many developing economies are piling on debt at a moment of fragile growth, rising interest costs, and waning political stability.

The question is no longer whether emerging markets can borrow, but whether they can sustain the weight of obligations that risk morphing into the next global financial fault line.

Last week more than $27 billion in EM bonds were issued including deals from Saudi Arabia, Turkey’s sovereign wealth fund and Brazilian oil giant Petrobras.

Indonesia, Kuwait, Oman and Nigeria are expected to sell dollar debt by year-end.

JPMorgan strategists Fariha Ahmmed and Nishant Poojary forecast EM sovereign bond issuance this year could near $240 billion, which would set a record. Lower-rated sovereigns that have regained market access may opportunistically look to tap debt investors, the strategists added.

Despite the swings in so-called core markets, local emerging market debt is up 13% this year, while dollar-denominated notes are up more than 8%, according to Bloomberg data.

Both are beating developed-market debt, which is up 6.5%.

The extra-yield investors demand to hold emerging-market debt over similar US Treasuries has shrunk to 298 basis points on average, hovering near the lowest since 2019, according to a JPMorgan gauge.

Investors poured money into EM-dedicated debt funds for the past 20 straight weeks, adding $1.9 billion in the week ended Sept. 3, according to the latest EPFR data compiled by Bank of America.