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1 minutes to read by  BlueBay Fixed Income team, P.Kurdyavko, CFA Jan 9, 2024

Watch time: 3 minutes, 35 seconds

Summary Points:

  • Emerging market debt currently offers one of the highest yields in the last 13 years at the index level– through a combination of higher rates and wider spread. This offers an exciting opportunity for investors.

  • Fundamentals are improving for EM countries. Not only is the growth expected to exceed that of Developed market countries in 2024, many EM central banks have followed an orthodox monetary policy path leading to inflation being moderated.

  • The high commodity prices have also led to improvements in fiscal and current account balances in many countries leading to better credit profile.

  • Defaults are likely to come down from their peak in 2022 and settle closer to historical averages.

  • The volatility is expected to come from two main sources – core rates and geopolitics.

    • But in geopolitics it is worth remembering that only a handful countries are directly affected by war and even fewer by potential flashpoints in Asia.

    • Away from these there are many EM countries which are healthy, growing and offer very attractive yield. Investors should capitalize on them through active portfolio construction.

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