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Emerging markets debt storm

Worst year on record for #emergingmarkets debt in terms of the JPM EMBI GD index. Fears of global recession, tighter monetary policy by most central banks, and dollar strength are pulling investors out of one of the few places where you can still find high nominal yields. New issuance is low and getting lower and investors appetite for risk is muted at this point. EM yields can be decomposed into the basis (US Treasuries) and credit spread. Treasuries are having the worst year on record, and spreads continue to widen. Lastly, local currencies are also getting slammed by dollar strength. All possible headwinds for EM debt are currently at play.


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Source: FT, Bloomberg.



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