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The Time is Now

Seizing the Opportunity in Emerging Market Investment Grade Credit
03 April 2025
    Articles
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    Executive Summary

    • Income is back... for the first time in a decade investors can generate better bond returns without relying heavily on spread or duration gains. The investment grade sector of Emerging Market Debt offers a compelling opportunity to construct a portfolio of higher-quality bonds with attractive all-in yields, creating a buffer against potential headwinds
    • 5.5 per cent Investment Grade Yield! Looking forward, the attractive yield alone may be the primary driver of returns with additional upside potential for longer-duration assets like EM IG with the Federal Reserve maintaining a bias toward further policy easing
    • Paid premium for the same credit rating. Despite sharing the same average credit rating as US IG, EM IG currently offers nearly 100 basis points of additional spread compensation. This EM IG spread premium stands in the 70th percentile of cheapness, with spreads more than 40bps wider than historical averages

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