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.
June remained positive for EM credit, supported by further spread tightening despite a more challenging
macro backdrop and higher US Treasury yields. EM monetary policy and growth trends stayed highly differentiated, with AI-linked economies and some oil exporters showing greater resilience than oil importers. Geopolitical tensions eased following US–Israel–Iran negotiations and the reopening of shipping routes through the Strait of Hormuz, improving investor sentiment, although uncertainties remain.
Supported by strong technicals, investor inflows, and resilient corporate and sovereign fundamentals, EM
spreads tightened further, with corporate and sovereign spreads narrowing by 6bp and 2bp, respectively.
Figure of the month
The emerging markets manufacturing PMI remained stable at 51.4 in June, confirming the continued expansion of industrial activity. Tensions related to the Strait of Hormuz eased, supported by the recovery in oil shipments and lower oil prices, which helped reduce production costs and improve delivery times. Most major emerging economies recorded PMI readings above 50, indicating expansion. Only Indonesia, Turkey, and Poland remained under pressure. In Indonesia, political uncertainty and tighter monetary policy continue to weigh on activity. In Turkey, the ongoing disinflation program is slowing economic growth. In Poland, weak European demand continues to weigh on industrial exports.
