Schroders Emerging Markets Lens: Emerging Market Debt
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👤Schroders
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Summary
Hard currency emerging market debt (EMD):
– Valuations vary:
1. The spreads of investment grade (IG) sovereign and IG corporate indices are close to their historical medians. High yield (HY) corporate index spreads have inched slightly above the historical median.
2. The spread of the HY sovereign index is well above the historical median, as a number of smaller countries are hit by rising commodity prices
Local currency EMD:
– Local currency EM bond yields have increased in 2022
– The key question is what impact the commodity price shock will have on inflation
– Offer a sizeable real yield premium over developed market (DM) bonds
– Historically, this has led to strong performance of EM local currency bonds
– There are undervalued currencies in all three EM regions. On average, Latin American currencies are the cheapest, whereas Asian currencies have the least appealing value
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👤Schroders
