According to BlackRock, emerging market governments have accumulated less dollar debt, built up foreign reserves and adopted flexible exchange rates to obviate mistakes during the 1980s and 1990s crises. Though the current outlook for emerging markets debt is far from sanguine, some analysts see opportunity in the asset class.
Demand for emerging-market debt has been fueled, in part, by a global environment where more than $12 trillion in government debt is offering negative interest rates, according to Fitch Ratings. Essentially, negative yields mean that lenders pay borrowers to park their money,” according to MarketWatch.
While many emerging markets have garnered a bad reputation for experiencing spiraling debt defaults in face of rapid currency depreciation, the developing economies are more resilient in a weak commodities environment.
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iShares J.P. Morgan USD Emerging Markets Bond ETF
Tom Lydon’s clients own shares of EMB.