The Federal Reserve (Fed) reinforced its stance last week that financial conditions are tight enough, taking concerns of a second round of hiking off the table and assuring the market that interest rate cuts remain the most likely scenario. We take a closer look at the opportunities we believe have arisen in emerging market debt (EMD) from the change in market sentiment.

What does this mean for fixed income investors?

We believe the bar for EMD to outperform is lower than for US fixed income; the lack of a Fed rate hike is enough to bolster the EMD market vs. the need to see rate cuts in line with the Fed’s projections. We expect the higher-for-longer narrative, without further hikes, to be a supportive market environment of EMD. We are being highly selective and our exposure is skewed to countries where central banks are likely to cut rates and real policy rates are expected to be over 5%, such as Mexico and Brazil. 

About the Bond Bulletin

Each week J.P. Morgan Asset Management's Global Fixed Income, Currency and Commodities group reviews key issues for bond investors through the lens of its common Fundamental, Quantitative Valuation and Technical (FQT) research framework.

Our common research language based on Fundamental, Quantitative Valuation and Technical analysis provides a framework for comparing research across fixed income sectors and allows for the global integration of investment ideas.


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