Emerging Europe fixed income market development over the last decade

Let’s talk about Emerging Europe fixed income market.

                    • Emerging Europe bond issuance grew substantially in number and total amount during the last decade
                    • From being an uncharted region with unknown risks and unclear governance CEE became a full-fledged participant in both corporate and government bond markets
                    • There are attractive investment opportunities now in Emerging Europe for bond investors

10 years ago Emerging Europe was an uncharted part of Europe in terms of bond issuance both on government and corporate level. In turn, there were few fixed income investment opportunities in the region for international investors and bigger names were passing by the region whatsoever due to small size of issuers and lack of choice among them.

A decade ago the main financing source was bank financing due to small corporate size and scale of activities. At that time the main issuers in the bond market were blue chips from Russia, such as Gazprom, Lukoil or VTB.

On the government level, due to an aggressive build up in public and especially private debt in the prior years, Emerging Europe countries were among the hardest hit by the 2008/2009 financial crisis and were forced to borrow in some cases at double digit interest rates implying particularly high risk.

Now this is distant past.

Corporate bond market development

Emerging Europe corporate bond market advanced substantially in the last 5 years, not even talking about the last decade. In 2015 there were 80 CEE corporate bond issues over USD 200 M in size in USD and 25 in EUR. During this period, many companies in the region grew up for international bonds and in 2020 there were 250+ issues in USD and 100+ in EUR.

Nowadays almost every Emerging Europe country has a company that borrowed in the international markets, varying from energy companies in Czech Republic to agricultural company in Moldova. The best-known energy sector issuer in Central Eastern Europe CEZ AS first checked international market in 2006 with EUR 500 M issue. Currently the company has 5 issues outstanding in EUR with amounts from EUR 500 M to EUR 750 M and 13 more issues in smaller amounts or in different currencies (USD, JPY, CZK).

Following CEZ AS, energy companies from other countries such as Croatia, Lithuania, Estonia, Bulgaria also issued international bonds. For example, Lithuanian state energy company issued three issues in last 3 years, starting with EUR 300 M 10 Y in 2017, another EUR 300 M in 2018 and one more this year during the market turbulence in May. All of them were long term issues and currently there is almost 1 bn EUR in total outstanding.

The region also emerged as a market for well-known financial intermediaries such as J.P.Morgan, BNP Paribas or Citigroup becoming active bookrunners. It shows that there is a significant demand from their clients for the Emerging Europe bonds.

The region is attractive to investors because it is classified as an Emerging market in terms of growth potential and level of yields, while most of the countries are approaching Western Europe in terms of living standards and ease of doing business, applying EU regulatory framework and OECD guidelines for corporate governance.

Green bond issues

As European Union announced zero emissions target, more and more Emerging Europe companies start to explore international markets with green bonds too. For example, two of the last three issues of Lithuanian state energy company Ignitis were green bonds issued to raise capital for increasing efficiency and investing in sustainable energy development. Moreover, recently the company has tested the market with equity IPO.

This trend is noticed not only in energy sector but also in real estate, with majority of CEE real estate deals this year being green bonds: Globalworth 2026s, NE properties 2027s, CPI properties 2026s & 2028s, CTP 2023s & 2026s.

Government bond market development

Talking about government bond markets, expanding economies and successful experience in using leverage for the growth spurred the amount of bonds outstanding. In 2015 there were around 100 Emerging Europe government bond issues over USD 200 M in size in both USD or EUR, while in 2020 the number more than doubled, with more than 250 issues currently, most of them EUR denominated.

While Baltic states, Romania or Bulgaria borrowed in double digits in 2009 and mostly privately, who could have thought that these days Baltic states’ 10 Y issue is under 0 percent and the spread to German bund tightened to only 50 bps. The development of some CEE countries progressed faster than others and even led them to enter an “A rated club” along such countries as Ireland or Japan. That, no doubt, suggests lower borrowing costs.

During post-crisis years CEE countries tried to search investors globally issuing EUR or USD denominated issues but the lessons of the Global Financial Crisis were learnt. While the debt to GDP level increased to 40-50 % in all Emerging Europe countries, it remains substantially lower than Western European countries’ average. While ECB influences Eurozone members the most, other European countries use opportunity to get financing at negative rates.

Even local issues attract investors, i.e. Lithuanian, Latvian, Slovakian local issues are bought by Western investors too. Lithuanian government borrows locally every Monday. If the usual borrowed amount used to be EUR 10-30 M every week, in 2020 the amount increased to EUR 80-100 M, total issue size might be even up to EUR 0.5 bn. Central Europe or Western Europe investors found a way to participate in the auction via local intermediaries grabbing the premiums vs Eurobonds.

Non EU members also successfully borrowing

It is not only European Union members that use current low interest rate environment to diversify debt providers. Despite Sakartvelo is a relatively small economy globally and in Europe, there are 4 issuers that successfully borrowed in international markets. Even in Moldova, one of the smallest European countries by GDP, there is an agricultural company that has issued USD 200 M bond last year. Due to the borrowing limits in the banking regulations the company was not able to refinance with local banks, but successfully replaced short term bank financing for mid-term bonds in the international market.

It is worth mentioning that Balkan region countries are one by one successfully getting international financing as well. In 2020, Macedonia, Serbia, Montenegro and Albania borrowed in 2020 at interests which have never been so low and performed well in the secondary market.


All of the above provide for attractive investment opportunities now in Emerging Europe for bond investors, especially for active bond selectors and off-benchmark oriented EM strategies.

Please feel free to get in touch if you would like to learn more.

Kamile Gimbutaite
Institutional investor relations
INVL Asset Management
+370 662 40988