EM local bonds gain favour as dollar debt lags

Current trends indicate that investors are leaning towards local emerging market debt rather than dollar-denominated bonds.

The allure of attractive valuations combined with ongoing carry trades fuels this shift in strategy. Fund inflows and performance metrics distinctly reflect this investor inclination.

Nonetheless, potential rate hikes by the Federal Reserve could pose challenges to this emerging market approach, while a stronger dollar may discourage investments in local currency debt.