Emerging market borrowers have been turning increasingly to euro-denominated debt, lifting their share of euro issuance even as several face sizeable refinancing burdens in 2026. The shift underscores how developing economies are diversifying their funding sources while managing a wall of maturing obligations.
A growing euro appetite
Emerging market countries expanded their euro issuance, with their share of the market rising by three percentage points to around 8%, led by sovereign issuers including Mexico, Colombia and China. Tapping the euro market lets borrowers broaden their investor base and reduce reliance on dollar funding alone.
Diversifying currencies can help manage costs and risk, spreading exposure across markets rather than concentrating it in a single funding channel. For sovereigns with large financing programmes, that flexibility is valuable.
The refinancing challenge
Alongside new issuance, emerging markets face substantial refinancing needs. Sovereign supply reached around $260 billion, with Turkiye facing the largest refinancing requirements, followed regionally by Indonesia. Rolling over maturing debt at manageable rates is a central task for these economies in 2026.
- Emerging market euro issuance share rose about 3 points to roughly 8%.
- Mexico, Colombia and China led sovereign euro issuance.
- Sovereign supply reached around $260 billion.
- Turkiye faces the largest refinancing needs, followed by Indonesia regionally.
Supportive but shifting conditions
Emerging market debt has benefited from broad-based disinflation, favourable growth differentials versus developed markets and still-accommodative global liquidity. A weaker US dollar and high real yields supported local currency debt, while hard currency spreads tightened to multi-year lows.
Yet analysts caution that valuations look stretched despite strong fundamentals, raising the risk of mean reversion across both investment-grade and high-yield segments. Conditions that have favoured borrowers may not persist indefinitely.
Central banks and gold
The backdrop also features active central bank behaviour. Poland emerged as the largest official-sector purchaser of gold, acquiring around 100 tonnes in 2025, followed by Kazakhstan, Brazil, China and Turkiye, reflecting a broader appetite among emerging economies to diversify reserves.
What it means
The interplay of rising euro issuance, heavy refinancing needs and supportive-but-stretched market conditions defines the emerging-market debt story of 2026. Countries able to term out their obligations at reasonable cost stand to strengthen their positions, while those with concentrated maturities face sharper scrutiny.
For investors, the environment offers yield alongside caution, strong fundamentals tempered by valuations that leave less room for error. As global monetary conditions evolve, the balance between opportunity and risk in emerging market debt will remain closely watched through the year.