Emerging market debt (in USD terms) generated positive returns in May, even as EM investors appear increasingly cautious about near-term sentiment and a relatively less supportive rates backdrop. Prospects appear to be brightening in Latin America (LatAm), where economic activity has been better than expected during May. There have been positive surprises in Brazil and Mexico despite the restrictions on mobility resulting from an acceleration of COVID cases. Developed market central banks continue to lean against normalization expectations by reiterating their view that the bar for policy normalization remains high amid slow progress towards maximum employment. Inflation challenges and policy credibility issues have mounted though and some EM central banks have started tightening. May saw overall positive flows of +$2.5bn and +$1.3bn into local currency and hard currency, respectively. (Source for flows data: J.P. Morgan).