At Any Rate EM Fixed Income: Stay local this summer
Aug 7, 2025
Anezka Christovova, a key member of JPMorgan's Emerging Market Fixed Income Strategy team, shares her insights on the current dynamics in emerging markets. She discusses the impacts of recent U.S. economic data and geopolitical tensions, including the Russia-Ukraine conflict, on market risks. Christovova highlights the importance of understanding local conditions while navigating investment strategies in emerging market currencies. Additionally, she examines trends in credit spreads and the implications of Federal Reserve cuts for local bonds.
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US Slowdown Affects EM Markets
- The US economy shows signs of slowing with weakness in the labor market, likely cooling growth.
- EM local markets may benefit, but EM credit spreads seem too tight and likely to widen.
Technical EMFX Signals Ease
- Technical signals in EMFX that showed over-positioning have receded, easing pressure on currencies.
- August seasonality retrenchment magnitude has been mostly realized, reducing typical seasonal risks this year.
Fed Cuts Could Boost EMFX
- Normally EM rates rally strongly after Fed cuts but FX performance is mixed.
- This time EMFX could outperform due to expensive dollar valuations and positioning dynamics.