Chapters
Market background
It was a good month for risk assets, with positive total returns across most EM fixed income asset classes. At the macro level, figures released in March showed that inflation in the US remained sticky in February and this put upward pressure on US bond yields. However, a dovish-leaning press conference by the US Federal Reserve and its decision to raise its 2024 growth forecasts while maintaining its median ‘dot plot’ forecast of three rate cuts this year brought yields back down, with 10-year US Treasury yields ending the month slightly lower at 4.20%. Elsewhere, the Bank of Japan (BoJ) made its first interest rate hike in 17 years - officially ending its negative interest rate policy – and scrapped its yield-curve controls; both policy changes were largely in line with expectations. However, subsequent weakness in the Japanese yen reflected disappointment in the market that the BoJ was continuing to buy Japanese government bonds at its current pace, with its lack of forward guidance on the interest rate path and emphasis on financial conditions remaining accommodative also weighing on investor sentiment.
In emerging markets, central banks in Latin America became rather more hawkish, notably in Mexico, Brazil and Peru. In China, better-than-expected data releases included stronger exports (and a healthier trade balance), industrial profits and industrial production. However, retail sales were weak and the property sector remained soft, with a further fall in house prices and low sales activity. In India, economic data continued to be very strong, while in Nigeria, the central bank hiked rates by 200 basis points (bps).
Among EM fixed income indices, the local bond index (JP Morgan GBI-EM) was flat over the month. Hard currency markets fared better, with the sovereign bond index (JP Morgan EMBI) rising 2.1%, driven by high-yield issuers. In the corporate debt market, the JP Morgan CEMBI rose 1.0%.
