IIF: US$26.3bn EM Outflows in September 2026: Reduced Offshore Demand Raises Eurobond Spread Risk for Dollar-Funded African Issuers

Nonresident portfolio flows to emerging markets were negative in September 2026, with the IIF reporting US$26.3bn of net outflows, including about US$7bn from fixed income. Press coverage links the selling to a hawkish Fed, higher US Treasury yields and a stronger dollar. This is a broad withdrawal of offshore liquidity rather than a country-specific shock.

The transmission to African credit is direct: lower offshore demand reduces primary market headroom for dollar Eurobond issuers and raises secondary market concession required to place new issuance. Credits with short external refinancing clocks and reliance on nonresident holders — for example frontier sovereigns and high-beta corporates that tap the Eurobond market — will see financing spreads reprice.

Long-dated paper is most exposed through duration: credits with significant long-tenor lines face larger price moves for a given US yield impulse. Local-currency curves can also feel the squeeze where nonresident holdings of local bonds are material, tightening rollover conditions and adding FX pressure for those with external liabilities. Compared with regional peers, higher-beta credits — lower-rated sovereigns and corporates that rely on offshore investors — will underperform better-capitalised issuers.

Countries with deeper domestic investor bases and larger FX buffers should absorb outflows more easily than those dependent on portfolio inflows. The desk views this print as reinforcing a higher-risk-premium regime for dollar-funded African issuers, conditional on continued US rate strength and dollar appreciation.