Making Sense Live from the trading floor: Views on global rates, FX, and EM
Dec 11, 2025
Matthew Franklin Lyons, a specialist in global rates trading, and Stephen Jeffries, an expert in emerging market currencies, delve into intriguing dynamics affecting global markets. They discuss the factors behind the yield curve steepening and dissect the carry performance in emerging markets. The duo also reveals investor sentiments, highlighting surprising positioning amid uncertainties. Furthermore, they flag potential risks from AI-driven corporate issuance and vulnerabilities in asset swaps, painting a nuanced picture for 2026's financial landscape.
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Global Yield Curve Steepener Explained
- Global yield curves steepened as front-ends fell and long-ends rose due to central bank cuts and fiscal-driven supply shifts.
- Matthew Franklin Lyons links higher long yields to changing buyer composition and rising sovereign issuance across currencies.
Carry Trades Drove EM Outperformance
- Emerging markets and carry trades outperformed in 2025 as Fed easing and calmer macro headlines spurred flows into EM local currency.
- Stephen Jeffries sees a constructive 2026 backdrop if policy stays relatively easy and growth remains supportive.
Front-End Repricing Raises EM Caution
- Recent repricing of front ends has produced bearish reactions in some EMs after rate cuts, showing sensitivity to near-term policy moves.
- Stephen Jeffries notes Korea, Colombia and India saw front-end moves that warrant caution despite a constructive medium-term view.