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Emerging Market Debt Outlook Opportunities Amid Uncertainty

2024 is already shaping up to be a year of considerable uncertainty. The first quarter has given us a taste of that with a sharp reversal of expectations for the US economy and the monetary policy plan of the Federal Reserve. This matters for EM debt because the type of economic landing that unfolds in the US and the Fed rate action will heavily influence its fate this year. In hard currency sovereign debt, high yield stands to benefit the most if there are fewer than expected US rate cuts and is also set to be supported by positive idiosyncratic stories in the distressed space.

In local currency debt, local rates which have been driving performance over the past five quarters are likely to be more sensitive to the broader macro backdrop and to be negatively impacted should the Fed adopt a shallower rate-cutting cycle. In addition to the impact of the Fed and the US economy, we also consider the impact of elections, heightened geopolitical risks, and China’s ongoing difficulties on the prospects for EM debt this year.

Positive Real Rates Give Scope for More EM Rate Cuts

EMD Outlook Opportunities

Please click on the following link to learn more about how we envisage the rest of 2024 unfolding and the implications this holds for emerging market debt investors.

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