Money & Finance › Markets of the world › World bond markets: about $160 trillion of debt (2025)
Emerging-market debt: dollar bonds, local bonds and Brady bonds
Brady Plan 1989· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
Bonds sold by developing-country governments and companies, in dollars or in their own currencies; the modern market grew from the 1989 Brady Plan.
See it on the Money & Finance map →How it works
After Mexico's 1982 default, US banks were stuck with bad loans to Latin America. In March 1989 Treasury Secretary Nicholas Brady proposed swapping them for tradable bonds whose principal was backed by US Treasury zero-coupon bonds; Mexico went first in 1990. Today countries such as Mexico, Brazil, Indonesia and Turkey sell dollar bonds tracked by JPMorgan's EMBI indexes and local-currency bonds tracked by its GBI-EM indexes. Investors get exposure through EM bond funds and ETFs.
Why it matters
These bonds pay more than Treasuries for default and currency risk, and their boom-bust cycles often start with the Fed and end at the IMF.
Facts, rules and data
JPMorgan index data, IMF and World Bank debt statistics, Institute of International Finance debt monitors, rating-agency default studies, and US Treasury records of the Brady Plan.
Debates and risks
Whether the G20 'Common Framework', with China now a major lender, can settle future defaults faster than the multi-year Zambia and Ghana cases.
Connections (3)
▸Emerging-market debt: dollar bonds, local bonds and Brady bonds is restructured, when it fails, with the IMF and World BankFact, law or data
The connection
When a country cannot pay, the IMF lends with conditions such as budget cuts, and its debt analysis sets how much relief bondholders must give; the World Bank adds longer-term loans. Since 2020 the G20 'Common Framework' has coordinated restructurings, as for Zambia and Ghana.
When and why
Washington; cases include Mexico in 1995, Argentina in 2001, 2018 and 2025, Sri Lanka in 2023 and Zambia's 2024 bond deal.
How we know
IMF program documents and debt-sustainability analyses, and restructuring agreements published with creditors.
Debates and risks
Whether IMF lending encourages risky lending, known as moral hazard, or prevents worse crises.
▸Emerging-market debt: dollar bonds, local bonds and Brady bonds often carries ratings like High-yield 'junk' bondsFact, law or data
The connection
Many emerging-market governments are rated below investment grade (BB+ or lower), so their bonds trade alongside US junk bonds and pay similar spreads. Roughly half of JPMorgan's main EM dollar-bond index is high yield, including Turkey, Egypt and Nigeria, while Mexico and Indonesia are investment grade.
When and why
Global bond markets, using ratings from S&P, Moody's and Fitch.
How we know
JPMorgan EMBI index composition and rating-agency histories.
Debates and risks
Whether ratings judge emerging countries fairly; some argue the agencies are slow and biased.
▸Emerging-market debt: dollar bonds, local bonds and Brady bonds suffers when the Fed raises The federal funds rateMainstream view
The connection
When the Fed raises rates, dollar loans cost more, the dollar strengthens and investors pull money from riskier markets, so countries with heavy dollar debts struggle to repay. Volcker's hikes preceded Mexico's 1982 default, 1994's hikes the peso crisis, and 2022's helped push Sri Lanka and Ghana into default.
When and why
Washington and world markets, in 1982, 1994, the 2013 'taper tantrum' and 2022.
How solid is the link?
IMF and BIS studies of the 'global financial cycle' and fund-flow data from EPFR.
Debates and risks
How much of the damage comes from the Fed itself versus the countries' own policies.