New York, NY – Emerging markets debt has faced a tumultuous beginning to 2024, with various factors influencing its performance. A mix of unfavorable US consumer price index data, global economic uncertainties, and fluctuating interest rates contributed to the market’s volatility. Despite these challenges, emerging markets debt saw resilient growth, thanks to strong fundamentals and economic stability in some regions.

During the first quarter, central banks in developed markets maintained a hawkish stance, with differing approaches to monetary policy. While some nations kept rates steady, others like the Bank of Japan raised borrowing costs for the first time in years. On the other hand, emerging markets central banks grappled with inflationary pressures due to the COVID-19 pandemic, leading to diverse monetary and fiscal policy responses across countries.

Sovereign issuance in emerging markets had a robust start to the year, reflecting improved market conditions and investor confidence. Higher yielding countries that were previously sidelined due to elevated US Treasury yields and wider credit spreads were able to re-enter the market successfully. This included nations like Ivory Coast, Benin, and Kenya, as well as larger economies like Mexico, Brazil, and Saudi Arabia.

Currency markets in emerging markets experienced volatility, driven by a stronger US dollar and changes in local forex policies. Countries like Nigeria and Egypt saw significant currency devaluations to attract foreign investment and stabilize their economies. Despite these challenges, emerging markets continued to attract investors, with some countries making progress in debt restructuring talks and political transitions.

Portfolio managers continue to navigate geopolitical uncertainties and seek opportunities in emerging markets. By strategically adjusting exposure to currency regimes and sovereign credit, they aim to capitalize on market trends while managing risks. The global economic landscape remains unpredictable, but emerging markets debt presents opportunities for investors looking for growth potential and diversification.

As the year progresses, emerging markets debt will likely continue to be influenced by global events and local factors, shaping the investment landscape for the foreseeable future. Investors should stay informed and review their portfolios to align with evolving market conditions and opportunities for growth.