Emerging Market Debt Indicator July 2023

After the recent market rally, Thys Louw reflects on the importance of reforms and the trend towards ‘green’ funding in frontier markets. The wider EM Debt team also provides an update across the rest of the universe.

7 Aug 2023

16 minutes

EMD Team

This edition includes:

  • Market background
  • Top-down views and outlook for the asset class
  • Focus article: Frontier markets – charting a more sustainable course as the global storm abates
  • Regional highlights and corporate credit market review
    Our EM debt experts summarise market developments across the sovereign debt universe in July and outline what’s taken place in the EM corporate credit market.

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The fast view

Market background

July was a positive month for risk assets. While resilient US labour market data initially weighed on hopes of an imminent end to tight monetary policy, sentiment subsequently improved. The US Federal Reserve hiked the policy rate by 25 basis points (in line with expectations), but its less hawkish tone caused investors to forecast that the end of the hiking cycle could be near.


In Egypt, the Gulf Cooperation Council (GCC) started to step-up support, with the UAE providing US$400 million for wheat imports and the Arab Monetary Fund providing US$600 million for financial sector reforms. In Ghana, an improved budget deficit provided a positive sign of progress being made on the fiscal side.


Manufacturing activity softened across the region, while inflation continued its downward trend. The People’s Bank of China (PBoC) kept its policy rate unchanged, despite signs of a stalling economic recovery, meanwhile in India, despite manufacturing activity softening in June, the PMI remained relatively high.

Latin America

In Brazil, inflation continued to show signs of easing, with producer prices falling below market expectations. The Central Bank of Chile lowered its benchmark interest rate by 100bps, contrary to economists’ consensus, while in Colombia, speculation that the central bank could cut rates by up to 200bps before the end of the year lifted local bonds.

Central and Eastern Europe

The growth outlook in CEE remains negative overall, and PMIs are at multi-year lows, especially in the Czech Republic. However, the disinflationary trends in the region continued, but with no major surprises versus market expectations. In terms of monetary policy, Hungary continued with its rate-cutting cycle, reducing its policy rate to 15% and signalling continued cuts ahead. The Polish central bank is also paving the way for interest rate cuts ahead of the election.

Rest of Europe, Middle East and Africa (EMEA)

In Turkey, the central bank hiked its key policy rate by 250 basis points, which was much less than expected. Meanwhile, the Bank of Israel ended its hiking cycle, with the inflation outlook among the best in EMs. Turning to South Africa, with inflation well-behaved and pressure on the rand subsiding, the market moved to quickly price out any further hikes in the local bond yield curve.

EM corporate debt highlights

EM corporate debt had a positive month, overcoming the move higher in US Treasury yields as spreads tightened across both high-yield and investment-grade issuers. However, high-yield bonds outperformed investment-grade, with the former benefiting from a more aggressive tightening in spreads.

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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

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