Emerging market bonds: the great potential of a changing world
Increasing significance of emerging market bonds
1In 1990, the economies of the emerging markets (EM) accounted for 36 % of the global gross domestic product (GDP), and by 2015 this figure had risen to 58 %. Experts from the International Monetary Fund (IMF) estimate the EM share of global GDP will surpass 60 % by 2021. This dramatic increase in the EM share of global GDP has been the product of strong economic growth in developing countries in Asia, Central and Eastern Europe, Latin America, Africa, and the Middle East. As their economies have grown, the opportunities to invest have increased as well, making it easier than ever for investors to access these emerging markets.
Although the market environment for EM bonds deteriorated in 2018, many emerging markets are now better positioned than most developed countries: real economic growth is higher, and debt is lower relative to economic performance. Moreover, EM bonds are very attractively valued again in view of persistently low interest rates in Europe.
Opportunities to accelerate growth speak in favor of emerging market government bonds
In recent years, the emerging markets have been burdened by currency turbulences, weak equity markets and waning growth momentum. The Fed’s announcement at the end of January that it was not planning any further interest rate hikes is likely to boost economic growth in the emerging markets – and enhance the attractiveness of their bonds. However, the fundamental situation varies widely in the different emerging economies.
Read more on this topic in Edgar Walk's special edition of market:update.
Advantages of Payden & Rygel emerging market bonds
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