At Any Rate EM Fixed Income: Summer catch-up as spreads catch-down
Jul 25, 2025
Ben Ramsey, Head of EM Sovereign Strategy at JPMorgan, dives into the latest shifts in Emerging Market fixed income. He discusses the cautious outlook on EM currencies due to trade tensions and economic forecasts. Ramsey sheds light on the tight sovereign spreads at multi-year lows and their implications for investor sentiment. There’s also a compelling analysis of swap spreads, which have turned significantly negative, illuminating the intricacies of the Treasury market. This insightful conversation is a must-listen for anyone interested in emerging markets.
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EM Market Drivers in Mid-2025
- The key drivers for EM risk markets include tariff uncertainties and lower expected US growth in H2 2025.
- Despite this, markets remain resilient with many risk markets near all-time best levels, pricing in little downside risk.
Tactical Patience advised for EMFX
- Traders should adopt a tactical, patient stance in EM currencies due to overbought signals and near-term tariff risks.
- Medium to long term, EM currencies are likely to strengthen given their structural undervaluation against the dollar.
EM Sovereign Spreads Near Tight Lows
- EM sovereign credit spreads are very tight, nearing multi-year lows, reflecting reduced risk premiums.
- Caution is warranted as spreads appear priced for low recession risk, which could widen if economic conditions worsen.