Emerging Market Debt Indicator December 2023

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

11 Jan 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
Against the backdrop of falling government bond yields and improved risk appetite, EM debt and currency markets had a strong month, rounding off a positive year for asset-class performance.

Markets continued their strong performance in the final month of the year as positive economic data and declining inflation led to growing confidence among investors that the next move for central banks would be a dovish pivot. This gained further momentum through the month, predominantly due to the US Federal Reserve (Fed) signalling rate cuts for 2024, leading to a continued drop in US Treasury yields across the curve, with the US 10-year yield falling 45bps over the month to end the year roughly where it began, at 3.88%. Sovereign bond yields also fell across Europe, helped by a dovish European Central Bank. Elsewhere, lower energy prices contributed to benign inflation dynamics and supported various other bond markets across the globe.

In emerging markets (EMs), falling inflation in Latin America allowed several central banks to continue or accelerate their rate-cutting cycles. In Brazil, the approval of a key tax reform prompted an S&P upgrade to the country’s long-term ratings, from BB- to BB. Mixed economic data out of China – where disinflation was more pronounced than expected – was met with various policy support measures.

Against the backdrop of falling government bond yields and improved risk appetite, EM debt and currencies had a strong month, rounding off a positive year for asset-class performance. In the local space, the JPM GBI-EM rose 3.2% in December (12.7% for 2023), with both bonds and FX contributing to returns. In the hard currency market, the JPM EMBI BD rose 4.7% in December, taking 2023 returns to 11.1%, while in the corporate market, the JPM CEMBI rose 3.1% in December (9.1% for 2023).

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.