Insights

Emerging Market Debt Commentary - January 2021


Emerging market debt (in USD terms) experienced a volatile start to the year, with the end result for the month being a modestly negative overall return. Concerns about the reintroduction of COVID lockdowns, slow vaccine rollouts and the impact on EM growth and fiscal outcomes, as well as political risks in some EM countries, resulted in some weakness. Despite the recent volatility, the medium-term prospects for EMD remain in place against the backdrop of an ongoing global recovery aided by policy support. Prospects are also bolstered by the US Federal Reserve maintaining its dovish monetary policy approach in the absence of notable inflation pressures, while positive news around additional vaccines in the pipeline also underpins sentiment. The month saw flows of +$5.6bn and +$6.3bn for hard currency and local currency, respectively, as investors continued to move money into higher yielding assets. (Source for flows: Morgan Stanley).

Figure 1 - Emerging Market Debt Index Returns – As of 29 January, 2021  

  1m  3m 6m YTD 12m 3yrs 5yrs
In USD              
GBI-EM GD (EM Local Currency) -1.07% 7.99% 5.91% -1.07% 2.92% 1.15% 6.42%
EMBI GD (EM Hard Currency) -1.09% 4.68% 3.24% -1.09%  2.55% 4.68%  6.89%
CEMBI BD (EM Corporates) -0.07% 4.10% 4.80% -0.07%  5.44% 5.97% 7.18%
               
In EUR              
GBI-EM GD (EM Local Currency) -0.37% 3.54% 3.09% -0.37%  -6.12% 2.00% 3.98%
EMBI GD (EM Hard Currency) -0.38% 0.37% 0.49% -0.38% -6.45% 5.56% 4.44%
CEMBI BD (EM Corporates) 0.64% -0.19% 2.00% 0.64% -3.82% 6.86% 4.73%
               
In GBP              
GBI-EM GD (EM Local Currency) -1.52% 1.68%  1.23% -1.52% -1.21% 2.33% 7.11%
EMBI GD (EM Hard Currency) -1.54% -1.43% -1.32% -1.54% -1.55% 5.91% 7.58%
CEMBI BD (EM Corporates) -0.52% -1.98% 0.17% -0.52% 1.22% 7.21% 7.88%

Sources: State Street Global Advisors, Bloomberg, JP Morgan as of 29 January 2021. Past performance is not a guarantee of future results. Index returns reflect capital gains and losses, income, and the reinvestment of dividends. Performance returns for periods of less than one year are not annualized.


Share