Why EM local debt may shine brighter

Four factors may work as catalysts in 2020

clock • 2 min read

Emerging market (EM) local debt is not for the faint-hearted. It remains one of the most under-invested asset classes in the world due to its volatility.

Between 2013 and 2015, the US dollar rally associated with the ‘taper tantrum' dragged EM local bonds down 27% (-10% annualised). Since early 2016, EM local bonds regained some ground, delivering 7.5% annualised in USD terms as of October 2019.   Most returns since 2016 have come from income and yield compression as EM countries slashed interest rates. The Brazilian central bank, for one, cut policy rates from 14.25% to 5.0%. Overall, the yield on the main benchmark for local bonds, JP Morgan GBI-EM GD index (GBI), declined from 7.1% at the start of 2016 to 5.1% at the end of Octob...

To continue reading this article...

Join Investment Week for free

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

More on Emerging markets

Four Graphs explaining India

Four Graphs explaining India

Four experts write

Investment Week
clock 12 February 2024 • 4 min read
JEMI's Omar Negyal: Emerging markets are well positioned to support AI boom

JEMI's Omar Negyal: Emerging markets are well positioned to support AI boom

Early adaption is key

Omar Negyal
clock 11 January 2024 • 2 min read
TSMC and Infosys most frequent top ten holdings across JP Morgan AM trust stable

TSMC and Infosys most frequent top ten holdings across JP Morgan AM trust stable

Emerging markets dominate

James Baxter-Derrington
clock 10 January 2024 • 1 min read
Trustpilot