Important information

The information contained in this website is intended strictly for sophisticated institutions.

The information contained in this website, does not constitute and should not be construed as an offer of, invitation or proposal to make an offer for, recommendation to apply for or an opinion or guidance on a financial product, service and/or strategy. Whilst great care has been taken to ensure  that  the  information  contained  in  this  website is  accurate,  no  responsibility  can  be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. You may only reproduce, circulate and use this website (or any part of it) with the consent of Capital International Management Company Sàrl (“CIMC”), 37A avenue J.F. Kennedy, L-1855 Luxembourg.

The information contained in this website is for information purposes only. It is not intended for and should not be distributed to, or relied upon by, members of the public.

The information contained in this website, may contain statements that are not purely historical in nature but are “forward-looking statements”. These include, amongst other things, projections, forecasts  or  estimates  of  income.  These  forward-looking  statements  are  based  upon  certain assumptions, some of which are described in other relevant documents or materials. If you do not understand the contents of this website, you should consult an authorised financial adviser.

Capital IdeasTM

Investment insights from Capital Group

Categories
Fixed Income
Hard and local currency bonds provide different routes to returns
Jeremy Cunningham
Investment Director
March 14, 2024
Download PDF

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

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. 


Jeremy Cunningham is an investment director at Capital Group. He has 36 years of industry experience and has been with Capital Group for seven years. He holds the Chartered Financial Analyst® designation. Jeremy is based in London. 

Learn more about
Fixed Income
Emerging Markets
Active Management
Asset Allocation

Our latest insights

RELATED INSIGHTS

Hear from our investment team.

Sign up now to get industry-leading insights and timely articles delivered to your inbox.

By providing your details you are agreeing to receive emails from Capital Group. All emails include an unsubscribe link and you may opt out at any time. For more information, please read the Capital Group Privacy Policy

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.