JEMD - EM Local Currency Bonds As A Portfolio Stabilizer
The reversal in developed markets interest rates over the past year provides a useful case study of how changing market expectations around developed markets rates impacts emerging markets bonds. As shown in the chart below, expectations for a rate hike at the recent July 31, 2019 U.S. Federal Reserve (Fed) meeting began to collapse in November 2018 amid concerns of a growth slowdown. Equities and high yield bonds suffered as a result, but emerging markets local currency bonds were surprisingly resilient during this market volatility.
Emerging Markets Local Currency Bonds Outperformed Amid Changing Rate Expectations