Emerging Market Debt Indicator – July 2025
Our EM Debt team shares its latest outlook and positioning across the investment universe.
Chapters
01
Market background02
Top-down views and outlook03
Africa04
Asia05
Latin America06
Central and Eastern Europe, Middle East and South Africa07
EM corporate highlights01
Market background
The US Federal Reserve delivered its third 25bps rate cut of the year, but yields rose across most of the US Treasury curve. The EM local debt market performed well, rounding off a very strong year for the asset class.
December was another positive month for the EM debt asset class, rounding off a strong 2025.
In the US, the Federal Reserve (Fed) delivered its third 25bps rate cut of the year, but yields rose across most of the US Treasury market. The driver of this was stronger-than-expected economic data, which prompted market participants to moderate their rate-cut expectations. By the end of December, market pricing suggests that two further rate cuts are expected by the end of 2026.
The EM local currency debt market (JPMorgan GBI-EM GD) rose 1.5% over the month in US dollar terms, ending the year 19.3% higher – almost two percentage points more than the S&P 500. On the rates side, South Africa and Turkey led the index in December – lower-than-expected inflation data boosted both markets. In the FX market, the Chilean peso, South African rand and Thai baht were the standout performers.
The hard currency market (JPMorgan EMBI BD) rose 0.7% in December, bringing the annual return to 14.3%. The high-yield segment drove performance (1.4%) while investment-grade returns were flat (0.0%). Spreads tightened in both segments in reflection of the ongoing improvement in appetite for risk. Continuing the trend seen throughout the year, African markets were top performers in the index.
General risks. The value of investments, and any income generated from them, can fall as well as rise. Where charges are taken from capital, this may constrain future growth. Past performance is not a reliable indicator of future results. If any currency differs from the investor's home currency, returns may increase or decrease as a result of currency fluctuations. Investment objectives and performance targets are subject to change and may not necessarily be achieved, losses may be made. 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 (inc. China): 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.
