Chapters
Market background
June was a volatile month for fixed income markets. In the middle of the month, US Treasury yields fell across the yield curve following the release of lower-than-expected US inflation figures, with other developed government bond markets following suit. Towards the end of June, higher-than-expected inflation data from Canada and Australia drove a partial reversal of this and weighed on investor sentiment, although the US 10-year Treasury yield still ended the month 10bps lower at 4.40%.
Against this backdrop, EM debt market performance was mixed. The local bond market (JP Morgan GBI-EM GD) returned -1.1% over June, driven entirely by EM currency weakness (-1.9%), while the hedged local bond market returned +0.8%. EMFX was impacted by the unwinding of carry trades in Latin America over the month (relating to the Mexican election result). In the hard currency space, the sovereign debt market (JP Morgan EMBI GD) rose 0.6%, driven by the investment-grade segment of the market, which benefited from the fall in US Treasury yields. The corporate debt market (JP Morgan CEMBI BD) also generated a positive total return, gaining 0.9%, with both high-yield and investment-grade market segments adding to returns.
