Emerging market external debt has been out of favour with investors throughout 2023. We explore whether yields of 8.6% may finally tempt them to get back in.

What does this mean for fixed income investors?

There are many reasons to like EM External debt. The fundamentals of the countries are resilient. All in valuations are appealing, although they admittedly may become more attractive on a relative basis in the future than they are currently. Technicals should provide support for the market in the short term. With this said, the main risks to revisiting EM external debt now are a significant recession or inflation remaining at elevated levels. Neither scenario is currently priced into the market, however, investors should consider the possibility of economic data negatively surprising market expectations.

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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