Emerging Markets Bonds

EM fixed income stayed resilient through the war-induced shock. As oil prices fell, inflation remained contained. Capital inflows resumed after a brief interruption and sovereign rating upgrades continued. We believe the asset class is supported by elevated global risk appetite, attractive local-currency yields, and diversification away from US assets.

Emerging markets have been taking up a bigger share of investors’ attention. But why? Watch these videos to take a look at the bigger picture.

Markets have held up surprisingly well, even as pressures build beneath the surface. Since the war in the Middle East began in February, investors have had to contend with rising energy prices, renewed inflation concerns, and a quasi-U-turn in monetary policy expectations.

Emerging markets have just weathered two major global shocks — and have come out on top. We believe this is no accident. Many investors missed the post-Liberation Day rebound by staying anchored in a framework that may no longer describe the emerging-market universe. The same misreading risks compounding potential portfolio under-exposure today.

We believe EM fixed income is better positioned today than four years ago, despite uncertainty around the duration of the war and the disruption of oil supply. If de-escalation materializes in the short term, EM bonds may rebound amid a resumption of pre-war trends, including diversification away from US-centric portfolios.

2026 began with the global acknowledgement that the TACO mantra (Trump Always Chickens Out) does not apply to foreign policy. We believe this sends a clear message to leaders of small and medium-sized countries opposing or refusing to cooperate/negotiate with the Trump administration.

Expand your knowledge on the sub-asset class of emerging market bonds.

Looking ahead, we expect continued inflows, rising demand, and reduced supply to support EM hard-currency bonds. For EM local-currency bonds, we believe the current macroeconomic environment remains favorable, despite our conviction in a USD bear market being lower than it was a few months ago.

As we approach 2026, Fixed Income markets are shaped by weaker fundamentals, though lower uncertainty may reduce the likelihood of a catastrophic decline. That said, volatility will remain a defining feature. We believe the year ahead holds great potential for active managers who remain steady at the wheel: cautious but nimble.

The Brazilian corporate bonds market has recently been demonstrating signs of volatility. Systemic or idiosyncratic? Or both?

As investors face tariffs, muted growth, and geopolitical risk, the Fixed Income team explains how emerging-market investment-grade bonds can provide yield and global diversification.

Despite questions about the Federal Reserve’s independence, growing US isolationism, and global trade risks, we see a runway for fixed income. Credit fundamentals remain strong alongside robust technicals and improving valuations. Our Fixed Income team shares where they are finding alpha opportunities and why they are cautiously optimistic.