Outlook for Emerging Markets Corporate Bonds: Why now?

Key highlights:

Now that Emerging Markets Debt has recovered from the post-COVID drawdown, what comes next?

With a decade-high bond yields, falling inflation, and central bank rate cuts, we are entering a promising environment for the asset class.

We find that EM Corporates are especially attractive for long-term investors.

We base our view on three main factors that should be supportive:

• the peak of Federal Reserve policy and the global interest rate cycle should prove favorable for higher yielding fixed income asset classes
• improvements in emerging markets governance and financial conditions are positive for bottom-up investment stories ahead
• we believe the relative attractiveness of EM corporate bonds in terms of fundamentals and technical factors represents a compelling investment opportunity