Record issuance, falling costs, tighter spreads—and a slowdown in sustainable bonds: 2025 marked a year of unexpected developments in Latin American and Caribbean capital markets.

1. Issuance reached record levels in 2025: Latin American and Caribbean (LAC) international bond issuance totalled US$ 187 billion, surpassing previous peaks and marking a record high (figure 1). The increase was supported by favourable market conditions—including lower borrowing costs and a weaker U.S. dollar—as well as improved investor sentiment.

2. Notwithstanding strong overall issuance growth, thematic bond activity—comprising green, social, sustainability, and sustainability-linked (GSSS) bonds—contracted 47% in 2025. The region issued US$ 17.6 billion in GSSS bonds, representing 9.4% of total international bond issuance, a sharp decline from the record shares observed in previous years (35% in 2023 and 27.2% in 2024) (figure 2).

3. In 2025, sovereign credit rating actions in the region were net positive, continuing the trend that began in 2023. Overall, 35 rating actions took place, with upgrades and outlook improvements outnumbering downgrades and negative outlook revisions. There were eleven more positive than negative actions, and eleven more upgrades than downgrades (figure 3).

4. Spreads tightened and volatility remained contained: The Latin EMBIG narrowed by 131 basis points in 2025, compared with 66 basis points for the overall EMBIG. Stronger compression in LAC reflects sensitivity to exchange rate movements, as a weaker U.S. dollar and lower Treasury yields supported debt performance. By end-December 2025, LAC spreads stood at 330 basis points, compared with 231 basis points for the EMBIG (figure 4).

5. Equity markets outperformed: Following a low in early April after U.S. tariff announcements, regional equity markets rallied as risk appetite recovered and currencies appreciated. The MSCI Latin America Index rose by 46% in 2025 (in U.S. dollar terms), outperforming both MSCI Emerging Markets (31%) and MSCI G7 (19%) (Figure 5).

Together, these developments highlight a year of record market activity, improved credit sentiment, and stronger risk appetite toward Latin American assets.

For a complete and detailed analysis see the PDF attachment with the full document Capital Flows to Latin America and the Caribbean: 2025 Year-in-Review and Early 2026 Developments.