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EM debt: Hard and local currency bonds provide different routes to returns
Kirstie Spence
Fixed Income Portfolio Manager
Harry Phinney
Fixed Income Investment Director

 


Capital Group fixed income portfolio manager Kirstie Spence and investment director Harry Phinney discuss the different attributes, as well as the risk and return profiles of local currency and hard currency bonds. Here are their key points:  

  • Local currency bonds behave more like rate securities, responding to changes in domestic interest rates and to the shape of the yield curve.

  • Local currency debt offers maturity with greater liquidity and a wider set of tools for portfolio construction. Currency appreciation can also potentially be a key source of return over the medium to long term.

  • Hard currency sovereign bonds essentially behave like a credit asset with the primary risks of default and liquidity.

 


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Kirstie Spence is a fixed income portfolio manager with 28 years of investment industry experience (as of 12/31/2023). She is the principal investment officer for the Capital Group Emerging Markets Local Currency Debt LUX Fund and serves on the Capital Group Management Committee. She holds a master's degree with honors in German and international relations from the University of St. Andrews, Scotland.

Harry Phinney is a fixed income investment director with 18 years of industry experience (as of 12/31/23). He holds an MBA in international business from Northeastern University, a master’s degree in applied statistics and financial mathematics from Columbia University and a bachelor’s degree in international political economy from Northeastern University. 

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