Fixed Income
Emerging Market Debt

Emerging Market Debt Outlook

Published on
May 25, 2022
Contributors
RFPnetworks favicon
RFPnetworks editorial
Engagement & analytics
Subscribe

Trends newsletter

Get our insights on what asset manager selectors are reading. Delivered weekly.
Request successful. You will receive confirmation shortly.
Oops! Something went wrong while submitting. Try again.

Emerging Market Debt, like the entire fixed income asset class, has had a tough start to 2022.

Even hard currency bonds, as represented by the JP Morgan EMBI Global Diversified Index, have seen YTD returns not experienced since 1995. With 1Q22 completing four consecutive negative quarters - an occurrence which has only happened 3 times since 1993.

Looking further across the EMD spectrum, YTD performance for emerging market local sovereign bonds, investment grade and high yield corporate credit have all registered double digit negative returns.

With such results, it is of no surprise that YTD outflows for both local and hard currency bonds are now around the USD mid-teen billions.

The good news is twofold:

- EM Bond Yields are reaching levels where institutional investors are consider re-entering the market. Even frontier country bonds, with 50-60% higher than their hard and local currency emerging market counterparts, are gaining interest.

- And secondly, with the main contributor to the negative performance YTD being the interest rate differential between EM countries and the US. But, as many EM Central Banks pro-actively accelerate their interest rate hikes, real interest rate differentials may soon make EM local markets relatively attractive.

Yet many questions on the outlook for emerging market debt remain. Country specific risks remain elevated. As do lingering COVID concerns and geopolitical risks. And the cheapness of EM currencies is sensitive to the strength of the USD, which is being propelled by a hawkish FED and a risk-off safe-haven attraction.

But as always with Emerging Markets, there will be winners and losers. Selective EM economies and corporates are fundamentally strong and benefiting from rising commodity prices. Whereas for others, the post-COVID normalisation path is still unclear.

Related Investment Trends

Emerging Market Debt

Follow the asset managers and topics that are trending with manager selectors.
RFPnetworks EMD Hard Currency Bond research depicted by hardened chain dangling.

EMD Hard Currency Bonds Grab Investors

EMD research inside RFPnetworks receives a relatively large proportion of our daily traffic. Currently, there is a lot of new EMD information to digest.
Read post
RFPnetworks EMD Hard Currency Bond research depicted by hardened chain dangling.

EMD Hard Currency Bonds Grab Investors

EMD research inside RFPnetworks receives a relatively large proportion of our daily traffic. Currently, there is a lot of new EMD information to digest.
Read paper
RFPnetworks EMD local currency performance depicted by Brazilian woman asking questions through a mmicrophone.

EMD Local Versus Hard Currency Bonds

Emerging market local currency bonds have many benefits over EM hard currency bonds. But investors are not ignoring hard currency bonds at today's prices.
Read post
RFPnetworks EMD local currency performance depicted by Brazilian woman asking questions through a mmicrophone.

EMD Local Versus Hard Currency Bonds

Emerging market local currency bonds have many benefits over EM hard currency bonds. But investors are not ignoring hard currency bonds at today's prices.
Read paper
Mondrian EMD research on RFPnetworks depicted by tranquil lake in Africa.

The Case for Local Currency Emerging Markets Debt

An allocation to high-quality, developed market government bonds continues to play an important role in reducing the volatility of a well-diversified...
Read post
Mondrian EMD research on RFPnetworks depicted by tranquil lake in Africa.
Mondrian Investment Partners

The Case for Local Currency Emerging Markets Debt

An allocation to high-quality, developed market government bonds continues to play an important role in reducing the volatility of a well-diversified...
Read paper
Emerging Market Debt research on RFPnetworks depicted by Welcome to Paradise sign on Jamaican beach

Emerging Market Debt Outlook

Emerging Market Debt has had its toughest performance since 1994. Even hard currency EMD struggled. But the outlook for EMD has some good news.
Read post
Emerging Market Debt research on RFPnetworks depicted by Welcome to Paradise sign on Jamaican beach

Emerging Market Debt Outlook

Emerging Market Debt has had its toughest performance since 1994. Even hard currency EMD struggled. But the outlook for EMD has some good news.
Read paper
Distressed EMD research on RFPnetworks depicted by monk meditating.

Investing In Distressed EMD

Distressed Emerging Market Debt (EMD) may have been ignored for too long. That may be changing as double digit performance expectations materialise.
Read post
Distressed EMD research on RFPnetworks depicted by monk meditating.

Investing In Distressed EMD

Distressed Emerging Market Debt (EMD) may have been ignored for too long. That may be changing as double digit performance expectations materialise.
Read paper
EMD research on RFPnetworks depicted by famous landmark in Rio de Janeiro

EMD Winners & Losers

For investors with Global EMD asset managers, the question of shifting to a more regional approach to the asset class is starting to gain attention.
Read post
EMD research on RFPnetworks depicted by famous landmark in Rio de Janeiro

EMD Winners & Losers

For investors with Global EMD asset managers, the question of shifting to a more regional approach to the asset class is starting to gain attention.
Read paper
EMD research on RFPnetworks depicted by worried man on couch.

Russia & Ukraine Bond Expectations

What is the probability that Russia will default after 25 May 2022? And Russian Corporates will continue to pay their external debt?
Read post
EMD research on RFPnetworks depicted by worried man on couch.

Russia & Ukraine Bond Expectations

What is the probability that Russia will default after 25 May 2022? And Russian Corporates will continue to pay their external debt?
Read paper

Are you an asset manager selector?

Access 35k+ professional investment research white papers