FICC Focus
TCW’s Foley Looks to EM Debt for Idiosyncratic Carry: EM Lens
Jun 19, 2024
Penny Foley, MD of EM at TCW, and Damian Sassower discuss EM carry, election risks, foreign positioning, growth dynamics, and central-bank policies in the changing EM landscape. They explore EM sovereign stories, idiosyncratic carry strategies in Asia, Latin America, and Eastern Europe, EM corporates, and recent election outcomes in South Africa and Mexico.
21:23
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Quick takeaways
- EM landscape shifting towards idiosyncratic carry for uncorrelated income streams.
- Opportunities in EM local currency strategies for relative value and unique trades away from US rates policy.
Deep dives
Role of US Treasury Yields in EM Risk
US Treasury yields have been a key driver of EM risk premiums, influenced by factors like Fed rate cuts, inflation trends, and economic growth. While Fed actions impact EM positively during periods of solid growth, a significant decline in global economic conditions can negatively affect EM and other risk assets. Despite the Fed's volatility, EM hard currency returns have thrived due to spread tightening and high yield sectors, showing a shift towards monetary orthodoxy in countries like Turkey and increased support from institutions like the IMF.
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