This edition includes:
- Market background
- Top-down views and outlook for the asset class
- Focus article: From the eye of the storm: African fixed income
- Regional highlights and corporate credit market review
Our EM debt experts summarise market developments across the sovereign debt universe in September and outline what’s taken place in the EM corporate credit market.
The fast view
Market background
It was another difficult month for EM fixed income markets, with US dollar strength and rising developed market government yields both taking their toll. Hawkish rhetoric from the US Federal Reserve continued and the ‘dot plot’ of the Fed’s interest rate forecasts was higher than expected.
Africa
The government in Egypt continues to make progress towards listing state-owned companies on the country’s stock exchange. In Ghana, the central bank hiked policy rates again as inflation risks remain elevated, and the government indicated that it is looking to fast track an IMF agreement. Kenya’s medium-term budget framework pointed to a declining deficit, reflecting fiscal consolidation.
Asia
The slowdown in global growth continued to weigh more heavily on the region’s tech-exporting economies. In China, a broad mix of data appeared to paint a picture of improving economic dynamics, but growth headwinds remain.
Latin America
In Latin America, the Brazilian central bank kept rates on hold, bringing an end to the country’s hiking cycle, as inflation continued to fall. In contrast, Chile’s monetary policymakers raised rates by more than expected as there are no signs of inflation abating there.
Central and Eastern Europe
Governments across the region continue to make efforts to cap rising energy prices and introduce windfall taxes to pay for them, while central banks try to move towards the end of the rate hiking cycle. Inflation momentum in the Czech Republic is the most encouraging in the region and appears to support the view of the central bank that it can keep rates on hold.
Rest of Europe, Middle East and Africa (EMEA)
The combination of Ukraine’s successful offensive in Kharkiv, Russia’s partial military mobilisation and annexation of parts of Ukraine have increased uncertainty over the war’s longevity and outcomes. Unorthodox policymaking and high inflation continued in Turkey. In South Africa, inflation remains contained compared with other emerging markets.
EM corporate debt highlights
As a result of the rising US Treasury yields and the risk-off backdrop, EM corporate bonds came under pressure. Investment-grade (IG) debt underperformed high yield, despite spreads widening further in high yield, reflecting IG debt’s higher sensitivity to interest rate changes. No sector or rating category in the market escaped the sell-off.
