Emerging market debt (in USD terms) recorded negative returns in Q4 in both hard currency and local currency, mostly on the back of negative news flow around the Omicron COVID-19 variant and inflation. The more hawkish-than-expected congressional testimony of US Federal Reserve Chair Jerome Powell in late November and subsequent scale-back in monthly asset purchases by $40bn and $20bn per month for Treasuries and Agency MBSs respectively in December meeting was also an important factor. EM Central banks (most of Latin America (LatAm) and Central and Eastern Europe (CEE)) accelerated the pace of monetary policy normalisation, staying ahead of the tightening curve compared to their developed market (DM) counterparts.
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