Bond Bulletin: EM local currency debt’s emergence from hibernation

Many global investors have snoozed on the emerging market (EM) local currency debt asset class over the past few years. With rejuvenated momentum, we believe EM local is ready for a big year in 2025.

What does this mean for fixed income investors?

While EM fundamentals exhibit resilience, they will be rigorously tested as US policy shifts come into play. Inflation in emerging markets is expected to remain stable and yields have room to decline. Navigating the asset class is increasingly complex given the current macroeconomic environment and investors should not view EM local as a beta asset class. Though it has become easier to access with a multitude of different investment vehicles available to invest into the market, the ability to gain exposure to the asset class is not the same as actively allocating to it. We expect EM governments to continue increasing their local debt issuance over time and the stability of these markets will be supported by domestic buyers. The increasing amount of issuance in the market will in turn lead the asset class to be more important on the global fixed income stage.

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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