Chapters
Market background
September was a strong month for EM fixed income assets, across local and hard currency markets.
The global market backdrop was supportive, with developed market bond yields falling as the European Central Bank and the US Federal Reserve (Fed) both cut rates over the month – by 25bps and 50bps respectively. This marked the first rate cut in over four years in the US, where the inflation picture has continued to improve. The Fed’s decision, combined with some more encouraging data on the US economy, boosted risk assets across the globe.
Across emerging markets, several central banks in Latin America continued to ease monetary policy, boosting local bond markets; the exception was Brazil, where a resurgence of inflation prompted a rate hike. Many countries are also battling a severe drought, which is impacting energy production and causing wildfires. In Asia, Chinese policymakers announced a raft of stimulus measures aimed at boosting confidence and supporting the equity market, while Asian currencies benefited from US dollar weakness caused by the fall in US bond yields. In Central and Eastern Europe, growth data remained on the weak side, and several markets were impacted by significant floods.
The local bond market (JP Morgan GBI-EM) returned 3.4% in September, with local bond markets and currencies appreciating. Among hard currency assets, the sovereign debt market (JP Morgan EMBI GD) gained 1.8%, while the corporate market (JP Morgan CEMBI BD) returned 1.2%, with high-yield and investment-grade market segments contributing positively to the latter.
