Emerging Market Debt Indicator November 2023

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

12 Dec 2023

14 minutes

EMD Team


Market background
Top-down views and outlook
Latin America
Central and Eastern Europe, Middle East and South Africa
EM corporate debt highlights

Market background

Close-up of dark green leaves
November was a strong month for financial markets across the board, with emerging market fixed income no exception. A key driver was the sharp decline in US Treasury yields, reflecting revived hopes that the US Federal Reserve’s rate-hiking cycle has concluded.

November was a strong month for financial markets, with emerging market (EM) fixed income no exception. In large part, this was thanks to a sharp decline (rally) in US Treasury yields across the yield curve. The driver of the rally was a revival of hopes among market participants that the US Federal Reserve’s (Fed’s) rate-hiking cycle has come to an end and that the Fed could begin cutting rates next year. A lower-than-expected US CPI inflation print, plus messaging by the Fed – which suggested that financial conditions have significantly tightened – both contributed to this shift in expectations.

In the Euro Area, inflation hit a two-year low, influenced by declining energy prices and a slowdown in food-price inflation. This helped European yields to fall over the month, adding to the fixed income market rally.

Within EMs, libertarian candidate Javier Milei was elected as Argentina’s new president, and the market responded positively to his appointment of a credible finance minister. In Asia, strength continued in the technology sector in the north of the region, with robust exports and industrial production boosting these economies. In China, the renminbi strengthened over the month as the central bank fixed the currency’s daily trading band at stronger levels against the US dollar. In Turkey, the central bank continued with its aggressive rate hikes to tackle inflation, raising rates by 500bps versus 250bps expected.  

Among EM fixed income and currency indices, the local currency bond index (JP Morgan GBI-EM) gained 5.3%, driven equally by rates and FX. In the hard currency space, the sovereign debt market (JP Morgan EMBI BD) gained 5.7%, while EM corporates (JP Morgan CEMBI BD) climbed 3.6%, with both high-yield and investment-grade bonds contributing equally.

Authored by

EMD Team

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