Key takeaways:
- Institutional investors face the challenge of capturing yield, diversification, and growth from their fixed income allocations. Over time, EM government bonds have typically provided investors with higher yields and differentiated returns relative to DMs, showing modest correlation to global equities and global bonds.
- The emerging markets debt hard currency (EMD HC) debt universe spans around 70-80 countries that are subject to different economic cycles and are at varying stages of economic development, resulting in a diverse set of fundamental drivers.
- EMD HC offers the potential to isolate and benefit from the EMD return drivers, helping investors with asset allocation. Focused credit analysis can be rewarded, with country allocation and security selection helping to capture alpha in EMD.
In a world where fixed income investors are seeking yield, diversification, and growth, emerging markets debt hard currency offers a compelling opportunity. Spanning 70-80 countries at different stages of economic development, the asset class provides access to a wide range of economic drivers and return sources.
Today, the total emerging markets debt universe represents more than US$32 trillion1, making it a significant component of global fixed income markets.
We explore how emerging markets debt hard currency differs from local currency debt, the benefits of investing in the asset class and why active country and security selection can be critical to generating alpha.
1 Source: JP Morgan, total debt stock, 31 December 2025.
