FICC Focus EM Lens: Risk Appetite Is Improving, Capital Flows to Follow
Sep 12, 2025
In this engaging conversation, Bertrand Delgado, head of Latin America strategy at Societe Generale, shares insights on the improving foreign demand for emerging-market local debt. He discusses how geopolitical risks and opportunities are shaping investment flows, particularly in Latin America. Delgado analyzes the impact of central bank policies on debt performance and the favorable conditions for Latin American currencies. Additionally, he highlights the effects of political changes, especially in upcoming elections, on fiscal policies and investment opportunities.
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Latin America Seen As Undervalued Carry Play
- Global investors view Latin America as offering undervalued assets with attractive carry and disciplined macro policy.
- Central banks' orthodox stances and limited geopolitical risk boosted foreign demand for LATAM debt.
Contained Inflation Gives Policy Flexibility
- Inflation in the US and LATAM appears contained and likely to move toward targets over 1–2 years.
- That containment gives regional central banks room to ease as the Fed moves to cut rates.
Hedge Locally, Fund In Low-Cost Currencies
- Use local-market hedges and consider funding in low-cost currencies like the dollar or yen for carry trades.
- Target funding via currencies with low rates to support long positions in high-yielding EM FX.