Emerging Market Debt Indicator February 2023

Following a recent trip to Brazil and Mexico, Christine Reed reports on a deeply contrasting picture. In addition, the wider investment team provides an update across the EM debt universe.

9 Mar 2023

18 minutes

EMD Team

This edition includes:

  • Market background
  • Top-down views and outlook for the asset class
  • Focus article: Notes from the road: Latin America
  • Regional highlights and corporate credit market review
    Our EM debt experts summarise market developments across the sovereign debt universe in February and outline what’s taken place in the EM corporate credit market.

Download PDF

The fast view

Market background

After the strong start to 2023, February was a weaker month for financial markets. Data on the US economy pointed to a resilient labour market – coupled with disappointingly high inflation, this caused US Treasury yields to rise. Similarly, better-than-expected economic activity data led to a sizeable sell off in other developed bond markets. Against this backdrop, EM debt and currency markets weakened.


In Nigeria’s tightly contested presidential election, Bola Tinubu was declared the victor. Tinubu is expected to try to deal with the country’s macro imbalances. Egypt's government unveiled its privatisation plan (it plans to sell stakes in 30 state-owned enterprises). Ghana’s government finalised its domestic debt restructuring, setting the stage for external debt negotiations.


The rise in US Treasury yields and subsequent strengthening of the US dollar dominated asset price moves. As many central banks across Asia have not needed to hike rates as much as the US Federal Reserve, the interest rate differential was front of investors’ minds, weighing on currencies. China’s economic activity has continued to rebound, with services-oriented sectors performing particularly well.

Latin America

In Brazil, President Lula da Silva continued his criticism of the central bank’s monetary policy. More positively, the government is set to resume the collection of federal taxes on fuels at the end of February, which should help improve Brazil’s fiscal account. In Mexico, the central bank raised its key interest rate by 50 basis points to 11% in February, above expectations of a 25 basis point hike.

Central and Eastern Europe

While the overall economic growth picture in the region remains weak, there are some areas of surprising resilience – helped by lower European gas prices – and current account deficits appear to be reducing in size. Core inflation appears to be moderating across the region, albeit from particularly high levels. The notable exception is Hungary, where core inflation momentum is still concerningly high.

Rest of Europe, Middle East and Africa (EMEA)

Growth data in South Africa continued to be fairly downbeat, linked to the ongoing loadshedding (power outages). On the positive side, the finance minister announced quicker-than-expected support for Eskom at the recent budget. In Israel, there were bouts of volatility across domestic assets over the month (relating to political tensions), with both local bonds and the shekel selling off.

EM corporate debt highlights

Although EM corporate debt (JP Morgan CEMBI BD) fell 1.6% over the month, it held up relatively well compared to EM sovereign bonds (-2.2%, JP Morgan EMBI) and the Bloomberg Global Aggregate Bond Index (-3.3%).

General risks. All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.

Specific risks. Emerging market: These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.

Authored by

EMD Team

Important Information

This communication is provided for general information only should not be construed as advice.

All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

All rights reserved. Issued by Ninety One.

For further information on indices, fund ratings, yields, targeted or projected performance returns, back-tested results, model return results, hypothetical performance returns, the investment team, our investment process, and specific portfolio names, please click here.