Emerging Market Debt Commentary - Q2 2020

The unprecedentedly rapid and large monetary and fiscal stimulus put in place by the major global economies fuelled a sharp rebound in emerging bond markets over the quarter. As a result, Q2 Emerging Market Debt (EMD) returns were able to offset to a great extent the losses witnessed in the first quarter.

With developed market (DM) central banks signalling that their accommodative policies will not be reversed anytime soon, the appetite for risk assets and the hunt for higher yield gained traction. As a result, towards the end of Q2 we witnessed the return of flows into EM bond funds, with investors marginally favouring hard currency over local currency EM debt.