Emerging Market Debt Indicator June 2024

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

10 Jul 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
Improving inflation dynamics in the US ultimately boosted global fixed income markets, but developments within emerging markets drove up volatility and weighed on some currencies. This resulted in a negative return in the local currency EM bond market, in contrast with the gains seen in sovereign and corporate hard currency debt markets.

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.

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.