Capital Ideas Podcast Resilient markets: How frontier debt is weathering global volatility - Part 1
Jun 10, 2025
Holger Siebrecht, a fixed income investment analyst at Capital Group with expertise in African bonds, shares insights on the resilience of African bonds amid global market volatility. He discusses how geopolitical risks and tariff changes are shaping the investment landscape. Holger highlights the advantages of investing in frontier markets, including appealing traits like illiquidity premiums. He also delves into the complexities of foreign participation in local markets and the dynamics of emerging market debt, offering valuable strategies for mitigating investment risks.
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US Tariffs' Complex EMD Impact
- Tariffs by the US administration impact emerging markets through trade exposure and economic growth effects.
- This influence causes mixed effects on spreads, currencies, and disinflation in local markets.
Local Frontier Bonds' Stability
- Local frontier market bonds have inherent illiquidity premiums leading to wider spreads and higher coupons.
- These features yield lower volatility and diversification benefits in emerging market portfolios, even amid short volatility spikes.
Foreign Ownership Fluctuations
- Nigeria increased foreign participation in local bonds after reforms but saw moderation due to price declines.
- Ghana lost foreign participation post-default, while Zambia attracts heavy foreign ownership, showing varied country ownership profiles.