EM local currency debt looks attractive

emerging markets EMs government bonds fixed income Eaton Vance debt

21 June 2019
| By Oksana Patron |
expand image

With government debt still trading at negative yields in many developed markets, investors might want to take a closer look at emerging markets (EMs) local currency debt which currently offers some opportunities, according to Eaton Vance’s emerging markets debt team.

At the same time, the firm stressed that although local currency EM debt did carry risk, it represented minimal credit risk compared to hard currency EM debt.

“Even in the US, five-year treasury yields are negative when deflated by inflation expectations. The situation is not likely to change any time soon,” Eaton Vance wrote.

“Against this backdrop, emerging markets local-currency debt offers opportunity, even after the recent rally in yields.”

However, investors should be aware that there was a wide dispersion in yields within the EM debt sector, with countries like Malaysia, Indonesia and Mexico seeing their real yields in the 80th percentile relative to their levels over the past 10 years.

On the other side, other EM countries such as Poland, Hungary and Chile had real yields near the lows of the past few years.

“Investors must carefully weigh ever-present political and currency risk in the asset class. But with due diligence, EM debt can offer relief from the negative rate blues in global government bond markets,” Eaton Vance wrote.

Read more about:


Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry



Old Fella

Of course a survey commissioned by an adviser coaching business would find that having an external business coach is a k...

13 hours ago
One foot out the door

A financial planner is expected to earn between $95,000 and $120,000 per year, depending on the state. Really? I don't...

22 hours ago

The whole thing is a bit frightening especially the last note where notes on what might be done could result in the need...

1 day 19 hours ago

ASIC has cancelled the AFS licence of a Sydney wealth firm, the fifth Sydney firm to see a cancellation since the start of the year....

1 week 6 days ago

A former financial adviser has been banned by ASIC from providing financial services for inappropriate advice, among multiple breaches....

4 weeks ago

More than 20 winners from the funds management industry have been crowned at this year’s awards....

6 days 21 hours ago