EM Local Bonds Gain Favour Among Global Investors as Dollar Debt Lags
· Business · Economic Times
Emerging market investors are shifting focus toward local-currency sovereign debt as surging US Treasury yields diminish the appeal of dollar-denominated developing nation bonds. Attractive valuations and carry trade opportunities are driving this strategic reallocation across global fixed income portfolios. A Bloomberg gauge of domestic EM debt has outperformed dollar-denominated bonds by more than three percentage points since the end of June. A Bank of America survey shows that 84 percent of participating global fund managers are overweight local EM debt compared to hard currency bonds. However, potential interest rate hikes by the Federal Reserve and a stronger dollar could challenge this market trend.
Why it matters
Global fund managers are reallocating capital away from dollar debt into emerging market local bonds, altering currency flows and valuations across developing economies.
Read the original report — Economic Times
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