MSD - EM Bonds: A Winner In The Race To Cut Rates?

Lower interest rates in developed markets have been the key driver of emerging markets debt returns so far this year, despite several idiosyncratic stories and emerging markets central banks that have until recently exhibited an overall tightening bias. In our view, the shift in policy globally is creating a potential runway for emerging markets currencies (EMFX) to possibly fare better versus the U.S. dollar, and for emerging markets central banks to, partly as a consequence, take a more dovish stance with regard to their own interest rate policies.

The key question is whether current interest

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