How Private Creditors Fared in Emerging Debt Markets, 1970-2000

Abstract

We estimate ex post returns to emerging market debt by combining secondary-market prices with observed flows based on World Bank data. From 1970-2000, returns averaged 9% per annum, about the same as returns on a ten-year US treasury bond. This reflects the combined effect of the 1980s debt crisis and much higher returns during 1989-2000. Annual returns since 1986 have been less volatile than emerging market equity returns but more volatile than returns on US corporate or high-yield bonds. Unlike returns on these bonds, however, emerging market debt returns do not seem significantly correlated with US or world stock markets.