Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Head of Fixed Income Strategy
Emerging market (EM) local-currency debt has faced significant challenges in the first half of the year, primarily due to rising yields and a stronger U.S. dollar. This has led to widespread losses across the asset class, with only China and South Africa showing positive 1H returns.
However, with the Federal Reserve signaling imminent interest rates cuts to begin from the September FOMC meeting, it may be an opportune moment to consider investing in emerging market (EM) bonds, particularly those denominated in local currencies. As global economic conditions evolve, several factors could make EM bonds an attractive option for investors seeking yield and diversification.
Investing in emerging market (EM) local currency bonds through ETFs offers key advantages over selecting individual bonds:
1. Diversification: ETFs provide broad exposure to bonds from multiple EM countries, reducing the risk tied to any single country’s economic or political instability.
2. Liquidity: ETFs are easily traded on stock exchanges, offering greater liquidity compared to individual EM bonds, which can be difficult to buy or sell, especially in less liquid markets.
3. Lower Costs: ETFs aggregate transaction costs, making them more cost-effective than buying individual bonds, which often come with higher fees and spreads.
4. Professional Management: ETFs are managed by experts who navigate the complexities of EM markets, offering investors the benefit of informed bond selection and portfolio management.
5. Accessibility: ETFs allow investors to access a diverse range of EM bonds with lower capital requirements, making it easier to invest in this asset class.
Investors looking to gain exposure to emerging market (EM) local currency bonds have several ETF options that provide diversified access to this asset class. Below are some of the most popular EM local bond ETFs, including options with Key Information Documents (KIDs) available for European investors.
29-Aug Uncovering Value: The Strength of European Investment-Grade Bonds
28-Aug Insights into this week's US Treasury auctions: 2-, 5-, and 7-year overview.
22-Aug Wage Growth and Economic Resilience Challenge Market Expectations for Aggressive ECB Rate Cuts
20-Aug Understanding U.S. Treasury Auctions: What You Need to Know
19-Aug Insights into this week's US Treasury auctions: 20-year U.S. Treasury bonds and 30-year TIPS.
16-Aug No Signs of Imminent Recession: Why Bond Investors Should Approach Insurance Rate Cuts with Caution
14-Aug Markets Skeptical Despite Positive UK Inflation Report
09-Aug Yield Curve is Disinverting: Lessons from Past Crises
07-Aug Stable Bond Spreads and Robust Issuance Make a 50 bps Rate Cut in September Unlikely
06-Aug Insights into this week's US Treasury refunding: 3-, 10-, and 30-year overview.
05-Aug Why Investors Must Pay Attention: BOJ’s Hawkish Moves Could Roil Global Markets
30-July BOE Preview: Better Safe than Sorry
29-July FOMC Preview: A Data-Dependent and Balanced Approach
24-July Market Impact of Democratic vs. Republican Wins
23-July Insights into this week's US Treasury auctions: 2-, 5-, and 7-year overview.
16-July Insights into this week's US Treasury auctions: 20-year U.S. Treasury bonds and 10-year TIPS.
15-July ECB Preview: Conflicting Narratives – Rate Cuts vs. Data Dependency
15-July Understanding the "Trump Trade"
11- July Bond Update: Faster Disinflation Paves the Way for Imminent Rate Cuts, but Risks of Economic Reacceleration Remain
09-July Insights into This Week's U.S. Treasury Auctions: 3-, 10-, and 30-Year Tenor Overview and Market Dynamics.
08-July Surprise Shift in French Election Fails to Rattle Markets for Good Reasons.
04-July Market Optimism Ahead of French Elections Drives Strong Demand for Long-Term Bonds
01-July UK Election Uncertainty and Yield curve Dynamics: Why Short-Term Bonds Are the Better Bet
28-June Bond Market Update: Market Awaits First Round of French Election Voting.
26-JuneBond Market Update: Canada and Australia Inflation Data Dampen Disinflation Hopes.
30-May ECB preview: One alone is like none at all.
28-May Insights into this week's US Treasury auctions: 2-, 5-, and 7-year tenors overview.
22-May UK April’s Consumer Prices: Markets Abandon Hopes for a Linear Disinflation Path.
17-May Strong trade-weighted EUR gives ECB green light to cut rates, but bond bull rally unlikely
14-May UK labor data and Huw Pill's comments are not enough for a bond bull rally
08-May Bank of England preview: Rate cuts in mind, but patience required.
06-May Insights into this week's US Treasury refunding: 3-, 10-, and 30-year overview
02-May FOMC Meeting Takeaways: Why Inflation Risk Might Come to Bite the Fed
30-Apr FOMC preview: challenging the March dot plot.
29-Apr Bond Markets: the week ahead
25-Apr A tactical guide to the upcoming quarterly refunding announcement for bond and stock markets
22-Apr Analyzing market impacts: insights into the upcoming 5-year and 7-year US Treasury auctions.
18-Apr Italian BTPs are more attractive than German Schatz in today's macroeconomic context
16-Apr QT Tapering Looms Despite Macroeconomic Conditions: Fear of Liquidity Squeeze Drives Policy
08-Apr ECB preview: data-driven until June, Fed-dependent thereafter.
03-Apr Fixed income: Keep calm, seize the moment.
21-Mar FOMC bond takeaway: beware of ultra-long duration.
18-Mar Bank of England Preview: slight dovish shift in the MPC amid disinflationary trends.
18-Mar FOMC Preview: dot plot and quantitative tightening in focus.
12-Mar US Treasury auctions on the back of the US CPI might offer critical insights to investors.
07-Mar The Debt Management Office's Gilts Sales Matter More Than The Spring Budget.
05-Mar "Quantitative Tightening" or "Operation Twist" is coming up. What are the implications for bonds?
01-Mar The bond weekly wrap: slower than expected disinflation creates a floor for bond yields.
29-Feb ECB preview: European sovereign bond yields are likely to remain rangebound until the first rate cut.
27-Feb Defense bonds: risks and opportunities amid an uncertain geopolitical and macroeconomic environment.
23-Feb Two-year US Treasury notes offer an appealing entry point.
21-Feb Four reasons why the ECB keeps calm and cuts later.
14 Feb Higher CPI shows that rates volatility will remain elevated.
12 Feb Ultra-long sovereign issuance draws buy-the-dip demand but stakes are high.
06 Feb Technical Update - US 10-year Treasury yields resuming uptrend? US Treasury and Euro Bund futures testing key supports
05 Feb The upcoming 30-year US Treasury auction might rattle markets
30 Jan BOE preview: BoE hold unlikely to last as inflation plummets
29 Jan FOMC preview: the Fed might be on hold, but easing is inevitable.
26 Jan The ECB holds rates: is the bond rally sustainable?
18 Jan The most infamous bond trade: the Austria century bond.
16 Jan European sovereigns: inflation, stagnation and the bumpy road to rate cuts in 2024.
10 Jan US Treasuries: where do we go from here?
09 Jan Quarterly Outlook: bonds on everybody’s lips.