Capital IdeasTM
Investment insights from Capital Group
Fixed Income
Jeremy Cunningham
Emerging market (EM) bonds are increasingly becoming a strategic holding for many investors but a key consideration in this is the different attributes of hard- and local currency-denominated bonds — the two broad sets of investments available in the asset class — and understanding the benefits each can bring to a portfolio.
Geographic representation across local and dollar sovereign bonds
Data as at 29 February 2024. Local bonds refers to the JPMorgan GBI-EM Global Diversified Total Return index. Dollar bonds refers to the JPMorgan EMBI Global Diversified index. Source: JPMorgan
Hard currency bonds are a credit asset where risk-adjusted returns compare favourably with both high-yield and developed market investment-grade debt. Local currency bonds, on the other hand, can be an attractive investment for investors seeking to diversify their currency exposure and willing to accept the investment risks associated with monetary and fiscal policymaking in the developing world. Local bond investments provide access to an increasingly diverse set of countries whose interest rate cycles are largely uncorrelated and whose markets are supported by a growing local institutional investor base.
Overall, a research-based approach can help find value within both hard and local currency debt, particularly during volatile markets.
Our latest insights
-
-
Long-Term Investing
-
Emerging Markets
-
Global Equities
-
Emerging Markets
RELATED INSIGHTS
-
-
Long-Term Investing
-
Emerging Markets
Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.