At Any Rate EM Fixed Income: Is better growth worse for EM?
Oct 1, 2025
Anezka Christovova, a leading expert in EM FX and local rates, and Ben Ramsey, head of EM Sovereign Credit Strategy, dive into the dynamic world of emerging markets. They discuss how stronger global growth is reshaping the EM landscape and the potential vulnerabilities for EM currencies amid a delayed Fed strategy. Anezka highlights the impact of commodity prices on exporters like South Africa and Chile, while Ben addresses how US market trends could affect EM sovereign spreads and the ongoing uncertainty in Argentina’s credit situation.
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Global Growth Has Repriced EM Outlook
- Growth has surprised to the upside globally, shifting forecasts and reducing the expected US slowdown.
- That stronger growth undermines the benign EM fixed income backdrop that anticipated Fed-led easing.
Asymmetric Fed Reaction Softens Dollar Risk
- Broad-based growth upgrades mean a stronger US need not spell EM weakness if rest-of-world growth holds.
- Asymmetry in Fed reaction means a softer labor market could still trigger larger dovish shifts than hawkish ones.
Rates More Vulnerable Than FX In Low-Yielders
- Local rates face more risk than FX in a stronger growth/delayed-cut scenario, especially low-yielding markets.
- Easing cycles in some low-yielders may be exhausted or constrained by fiscal and neutral-rate concerns.