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. Spread widening in EM hard currency (HC) markets was offset by the rally in treasury yields as investors continued to look through the sharp uptick in realized inflation, considering it to be a transitory rise. EM currencies underperformed, particularly so in the Latin American (LatAm) region amid political uncertainty in some countries. Even as flows slowed down in the week of the Federal Open Market Committee (FOMC) meeting, July experienced overall positive flows of +$1.9bn and +$1.8bn into hard currency and local currency, respectively (Source for flows: Morgan Stanley).
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.