• Emerging Market Debt: Another Test for the Financial Markets?
  • February 2, 2016 | Authors: Corinne Ball; Stephen Pearson; Jayant W. (Jay) Tambe; Michael O. (Mike) Thayer
  • Law Firm: Jones Day - New York Office
  • With oil hitting a 12-year low below $30 per barrel and with the volatility and decline of worldwide equities markets during the first weeks in January 2016, some are warning of a return to the bleak days at the beginning of the Great recession.1 In our April 2014 Commentary “High yield Debt: Credit Bubble and Litigation risks,” we warned-perhaps presciently-that a credit bubble may be forming in the high yield debt (“HyD”) market, including in the emerging markets (“EMs”).2 In particular, soaring debt levels in emerging markets such as China, Indonesia, Malaysia, Thailand, Turkey, and Brazil raised concerns about the risks associated with debt issued from emerging markets.3 Over the past 18 months, this trend has continued.4 and concerns about a potential bubble have intensified. The events of the last two weeks only add further credence to existing fears that the increasingly volatile HyD market will trigger another global financial crisis.5