Commentary Library

Speculation around tighter US monetary policy, the emergence of a new coronavirus variant and country-specific political issues weighed on emerging market bond performance in November.

.Emerging market bonds experienced a month of largely flat-to-negative returns amid rising US Treasury yields and as currency weakness dragged on local currency EM debt. Accelerating monetary policy normalisation was also a factor as central banks responded to inflation pressures, although Turkish debt weakened as a surprise rate cut stirred concerns about policy direction when inflation is still rising.

Emerging market debt (in USD terms) experienced a sharp sell-off in the third quarter, particularly so in September.

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.

Emerging market debt (in USD terms) recorded modest moves in July as worries related to regulatory crackdown in China and a recent surge in infections from the Delta variant of coronavirus were balanced by reduced expectations of the US Federal Reserve (Fed) going ahead with an earlier and more aggressive normalization of monetary policy.

Emerging market debt (in USD terms) delivered positive returns in the second quarter as the recovery in global economic growth continued to aid EM countries. Even as concerns about China growth and COVID-19 infections in Asia intensified during the quarter, higher growth in EM countries, a weaker dollar (dollar Index at -0.85% in Q2 2021) and lower US Treasury yields (10-year US Treasury at -27 bps lower in Q2 2021) underpinned the good performance.

Emerging market debt (in USD terms) generated positive returns in May, even as EM investors appear increasingly cautious about near-term sentiment and a relatively less supportive rates backdrop.

Emerging market debt (in USD terms) experienced a good April, supported by a partial retracement in cross-market volatility, improvement in EM currencies’ carry-to-vol ratios, and stabilization in US rates.

Emerging market debt (in USD terms) experienced a weak first quarter as markets reacted to a number of developments that included investor concerns about rising US Treasury yields leading to a pick-up in market volatility across asset classes.

Emerging market debt (in USD terms) experienced a difficult February as markets reacted to a sharp sell-off of US Treasury bonds that sent yields higher.

Emerging market debt (in USD terms) experienced a volatile start to the year, with the end result for the month being a modestly negative overall return.