Each month, our experts provide an overview of the key market highlights, an analysis of the macroeconomic environment, and insights into the convictions that shape our investment strategy in emerging market debt.
In May, EM credit extended its rebound, supported by continued spread tightening despite a more challenging macro backdrop, while UST yields remained under pressure due to reassessed inflation risks linked to the Middle East conflict. Monetary policies have continued to diverge against a backdrop of increasingly uneven growth: countries benefiting from the boom in artificial intelligence, as well as certain oil
exporters, are proving more resilient, whilst energy importers remain vulnerable. The geopolitical climate, marked by tensions between the United States and Iran and the issues surrounding the Strait of Hormuz, as well as the political situation in Turkey and the elections in Colombia and Peru, have had a significant impact on the markets. Finally, favourable technical and fundamental factors have led to a further narrowing of spreads, of around 3 basis points for corporate bonds and 10 basis points for government bonds.
Figure of the month
Taiwan’s economy grew strongly (+14.6% year-on-year in the first quarter), driven by high demand for AI-related equipment. Exports rose by more than 30% and remain the main engine of growth.Encouragingly, this momentum is also supporting the domestic economy, with rising private consumption. A similar trend is seen in South Korea. The outlook remains positive, with expected gains in investment and income.However, risks remain: heavy reliance on semiconductors and AI, and weak performance in other industries due to Chinese competition. A slowdown in the AI cycle could therefore have a significant impact.
