Emerging market debt (in USD terms) experienced a good April, supported by a partial retracement in cross-market volatility, improvement in EM currencies’ carry-to-vol ratios, and stabilization in US rates. COVID-19 remains a pertinent concern for EM amid increasing divergence between EM and DM in terms of COVID cases – a number of EM countries are struggling to contain new waves of infection, most notably in South-East Asia and parts of Latin America (LatAm). Against the backdrop of a strong global growth recovery and highly accommodative policies ensuring liquidity, it seems likely that political and country-specific developments will continue to drive differentiation within the EM universe. However, overall the current environment seems favourable for a gradual compression of risk premia across EM assets, particularly higher-yielding EM FX appreciation, especially given this segment’s recent underperformance. Overall positive flows of +$3.3bn and +$1.0bn into hard currency and local currency, respectively, were recorded in April. (Source for flows data: Morgan Stanley).