Emerging Market Debt Indicator July 2024

Our EM Debt team provides an update across the investment universe and shares the latest outlook and current top-down positioning.

14 Aug 2024

14 minutes

EMD Team

Chapters

01
Market background
02
Top-down views and outlook
03
Africa
04
Asia
05
Latin America
06
Central and Eastern Europe, Middle East and South Africa
07
EM corporate highlights
01

Market background

Close-up of dark green leaves
The rising prospect of interest-rate cuts in the US and Europe caused global bond markets to rally. Against this backdrop, it was a strong month for emerging market (EM) fixed income, with encouraging inflation dynamics within EM economies among factors providing further support.

Most bond markets posted gains in July, thanks to the rising prospect of interest-rate cuts in the US and Europe.

In the US, weaker economic growth and labour-market data caused yields to fall in the Treasury market. Further impetus came from signs that US inflation is heading in the right direction, with a lower-than-expected month-on-month print for June. At the end of July, the Fed opened the door to a September rate cut. This, coupled with rising tensions in the Middle East, caused a flight to quality by investors, which put further downward pressure on US Treasury yields.

Mirroring the US market, sovereign bond yields fell across Europe. At the start of July, the market was pricing in about 43bps of cuts by the end of this year; by the end of the month, this had increased to 60bps.

Against the backdrop of rallying global bond markets (especially the US), EM fixed income had a strong month. In the local currency space, the JP Morgan GBI-EM returned 2.3%, driven mostly by hedged local bonds (1.5%); EM FX provided the remaining 0.8%. Turning to hard currency markets, the sovereign index (JP Morgan EMBI GD) rose by 1.9%.

Ukraine’s hard-currency debt market was a top performer after the country reached a debt-restructuring deal. Encouraging inflation dynamics boosted South Africa’s local currency debt market. Inflation also continued to trend down in Central and Eastern Europe, allowing several of the region’s central banks to cut rates.

Authored by

EMD Team

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Investment Process
Any description or information regarding investment process is provided for illustrative purposes only, may not be fully indicative of any present or future investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for illustrative purposes only and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular Strategy. Portfolio data is expected to change and there is no assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available in the future at the levels presented, with the same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability of Manager to construct the illustrative portfolio and implement its investment strategy or investment objective.