What’s Driving EMD Performance?
Emerging market debt (EMD) enjoyed a positive start to 2021 amid strong global growth and optimism that COVID would be less of an issue, as investor demand for risk assets surged. EMD saw particular interest given the high yield on offer. However, the spike in Treasury yields and the rebound in the USD asked questions of the emerging markets that they did not necessarily have answers to. Against a pandemic backdrop, high inflation (which pressured central banks to raise rates) and big swings in certain currencies undermined returns.