Powell put(s) EM on Firmer Footing

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Portfolio Manager Perspectives BlueBay Emerging Market Debt Update

Those who were diligent enough to be at their desks last week probably felt like 2018 never ended as they endured another rollercoaster ride, with S&P futures experiencing a 6% peak-to-trough move. The initial sell off was sparked by a weak US manufacturing ISM and a profit warning from Apple (which then triggered a flash crash in FX). The ensuing rally was catalysed by a bumper payrolls number coupled with dovish comments from Chairman Powell on Friday. US Treasury yields also had some wild swings, with the December 2020 Eurodollar contract moving at least 25bps (one full hike) in the first few days of the year. Emerging market assets followed these swings in sentiment but have, by and large, proven a lower-beta version of their US counterparts to start the year, perhaps reflecting the much deeper valuation discount that already exists within EM after last year’s malaise