At Any Rate
EM Fixed Income: Lessons learned from post Liberation Day markets
May 1, 2025
Jonny Goulden and Saad Siddiqui explore the shifting dynamics of Emerging Market Fixed Income, focusing on the effects of recent tariff changes and global economic implications. They discuss varying investor sentiments towards emerging markets, highlighting which countries are favored or frowned upon. The podcast also analyzes the performance of emerging market currencies amid rising risk aversion and the complex outlook for interest rates. Ultimately, they look at how expected rate cuts could reshape the landscape for credit spreads and market resilience.
19:05
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Quick takeaways
- Emerging market assets are influenced by U.S. tariffs, leading to widening credit spreads and heightened recession risks for the U.S.
- Investor sentiment on emerging markets has shifted, with countries like Argentina and Brazil gaining confidence while Turkey and Lebanon face scrutiny.
Deep dives
Tariffs and Market Sentiment
The current market environment for emerging markets is heavily influenced by U.S. tariffs and their implications for the global economy. The discussion highlights that despite a significant backdrop of tariff-related uncertainties, U.S. equities have remained relatively stable, while credit markets reflect a more cautious outlook, evidenced by widening spreads for EM corporates and sovereigns. There is an ongoing tension between soft data indicating weakening sentiment and hard data that has yet to show the full impact of the tariffs. Economists foresee little chance of a tariff rollback, leading to probable recession risks in the U.S., which adds to the defensive stance on emerging market assets.
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