Standout Emerging-Market Bond Bet Set for Another Boost in 2024

• Investors are attracted to local bonds from emerging markets, anticipating significant returns due to shifting monetary policies, particularly in the context of faster interest rate adjustments by central banks in developing economies.
• Latin American domestic bonds are experiencing a notable rally, with a 24% increase in a Bloomberg gauge of local-currency government debt, outperforming their dollar-denominated counterparts. Speculation about a potential Federal Reserve rate cut in the U.S. will drive further gains in 2024.
• While Latin American bonds excel, other regions, such as Europe, the Middle East, Africa, and Asia, have seen varied performance in their domestic debts and currencies. Some currencies, like the Turkish lira, Russian ruble, and South African rand, have underperformed, while others, like the Czech and Hungarian rates, show promise.
• Solid demand for local assets in emerging markets provides financing opportunities for governments and corporations. The trend includes increased issuance of domestic debt, reaching $1.5 trillion in the current year, with countries like China, South Korea, India, Brazil, Russia, Thailand, and Saudi Arabia leading in local primary markets.
• The outlook suggests continued growth in corporate activity in Mexico's domestic bond market and potential sovereign issuance leadership in the first half of 2024.

(Source: Bloomberg)