Emerging market debt outlook with Alan Siow (with Joumanna Bercetche)

UST shock is priced; 30yr stabilizing >5% creates a constructive entry for FI. The real trade is EM local currency, as the dollar's safe-haven status frays & diversification beyond G3 becomes critical. Alpha is in bottom-up credit picking amid disruption—find the winners. The key emerging catalyst is China exiting deflation. A normalized China synchronizes the global cycle, forcing a complete rethink of the rates and inflation regime.

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Alan Siow 8.5

Emerging market debt outlook with Alan Siow (with Joumanna Bercetche)

yields

Treasury stabilizing here at just over 5% at the 30-year mark; we seem to have priced most of the immediate shock

Rising global bond yields; is this a good entry point for fixed income?

Joumanna Bercetche
Alan Siow

Remain constructive; treasury stabilizing at just over 5% at 30-year mark suggests most of immediate shock priced in; room for cautious optimism.

Recall resilience of markets after wading through wall of worry in late February/early March.
Wedge between local currency and hard currency EM bonds; does local currency present better opportunity?

Joumanna Bercetche
Alan Siow

Local currency EM fixed income offers diversification proposition; dollar not acting universally as safe haven means clients need to look beyond traditional G3 construct; value of local currency shown through.

Still early days but useful alternative.
What criteria for picking winners in this environment?

Joumanna Bercetche
Alan Siow

Fundamental value-based investors; revisit and re-underwrite all credit cases; disruption creates winners and losers; large EM universe makes it easier to find winners; some players benefiting from access to advantaged supply or unaffected production facilities.

Although disruption to oil, there are definitely players benefiting.
China no longer in deflation; inflation picking up for first time in years; what does this do to EM complex?

Joumanna Bercetche
Alan Siow

Fundamental change but still early days; China taking steps to address deflation through anti-involution policies; if China enters more orthodox economic environment, world becomes more synchronized; may change China's geopolitical posture as they've been less affected by recent crises.

May require rethink for rates and inflation outlook.

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