(In para 10 corrects to show that Latvia has not yet issued a bond but has mandated to do so. In same para, corrects currency of Petrobras bond to euro/sterling (not euro dollar)
* Emerging mkt bond sales up 64 pct in Jan yr/yr
* Sales follow last year's record issuance
* Issuers rush to borrow before costs rise further
By Sujata Rao
LONDON, Jan 10 (Reuters) - Emerging markets have kicked off their 2014 borrowing campaigns in style, with bond sales since the start of the year up 64 percent from year-ago levels and hefty order books contrasting with weakness in broader emerging assets.
The Philippines weighed in with a $1.5 billion bond on Friday, securing orders of $14 billion, or a subscription rate of nine times, a record for the country.
Its success rounds off a week of heavy bond issuance, not only from emerging governments and companies but also from bailed-out euro zone states Ireland and Portugal which returned to debt markets with heavily oversubscribed deals.
It also extends last year's record issuance of over $450 billion by emerging borrowers. That was despite volatility fuelled by the U.S. Federal Reserve's plans to wind down its bond buying, although issuance could start to slow if U.S. yields continue to rise.
This month, emerging borrowers have raised $18.5 billion, compared to $11.3 billion in the same period in 2013 and surpassing the $16.9 billion chalked up in 2012, according to Thomson Reuters data.
Sales accounted for roughly 13 percent of total global issuance, compared to 6 percent in the first 10 days of 2013 and contrasting with the losses that emerging stocks, currencies and local debt markets are suffering already this year.
Luis Costa, head of CEEMEA strategy at Citi, said the bond sales were evidence of still-robust interest from institutional investors who have cash to place at the start of the year.
"Institutional money is still participating in these markets, especially in primary (bond) auctions given the perception that you will get a premium," Costa said, referring to the so-called new issue premium issuers generally offer to lure investors.
"They would rather participate in new issues than in secondary markets where liquidity has been affected," he said.
Other bonds from this week include Poland's 2 billion euro issue and a $4 billion deal from Mexico. Slovakia also sold bonds while Kenya, Latvia, Israel and Romania have mandated for debt issues. State-run Brazilian oil firm Petrobras weighed in with a jumbo euro-sterling deal.
And a dual-tranche bond from Indonesia - one of the so-called Fragile Five group of emerging economies with the biggest overseas financing needs - for a total $4 billion received bids of up to five times in excess of the issue size.
Part of the recent rush to issue is motivated by the need to borrow before costs rise further. That's especially so at emerging companies that raised more than $350 billion in bonds last year and are expected to make up the bulk of 2014 issuance too.
The Federal Reserve is set to cut its bond purchases, or "taper" them, by $10 billion from this month and that has pushed 10-year U.S. Treasury yields towards near two-year highs around 3 percent. Last year, yields rose dramatically, doubling from 1.5 percent.
"The main positive is that the uncertainty over Fed tapering is out," said Simon Quijano-Evans, head of emerging market strategy at Commerzbank. "We know now that the taper will happen."
But a correction could loom as more bond issues hit and if U.S. yields rise further near the January Fed meeting. Analysts also note that many new issues, particularly sovereign, are not offering sufficient premium to existing bonds, especially given the backdrop of rising U.S. bond yields.
The Philippines, for instance, is paying 4.2 percent on its issue, while investors had reckoned fair value on the 10-year deal would be 4.3 percent, comparing it to the 4.4 percent yield on a longer 2026 bond.
Poland paid investors a 12 basis-point premium to its existing bond yield curve, while Slovakia and Mexico offered single-digit concessions.
"I'm not sure this resilience in the bond market will continue," Costa said. "The prospect of rising U.S. rates is still on the table and some spreads are looking way too tight."
But with latest U.S. jobs numbers on the weak side, markets could pare back their expectations of the speed at which the Fed will reduce its stimulus. That could spur fresh interest in new emerging market bonds. (Additional reporting by IFR; Editing by Susan Fenton)