Emerging Market Debt Commentary - August 2021

Emerging market debt (in USD terms) posted a modestly positive overall return in August as worries related to the possibility of early monetary policy tightening by the US Federal Reserve eased following the Fed chairman’s dovish speech at the central bank’s annual Jackson Hole symposium. Concerns related to the Delta variant have also abated somewhat, with hospitalization and case rates in many countries starting to slow. With global growth remaining strong, even as it has shown signs of peaking, and commodity prices stabilising at reasonably high levels, markets saw the return of a cyclical recovery trade in EM – this was especially evident in the final week of August, with relative outperformance of high-beta, and commodity-linked currencies.