The EM Carry Trade Takes Off
From the original
Artificial yield caps in the G10 are a subsidy for the carry trade to emerging markets
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4 itemsEM Fixed Income: Summer of carry, but getting crowded?
The desk believes the current Emerging Market (EM) fixed income landscape is characterized by a carry trade opportunity, though caution is warranted due to potentially crowded positions. Per the full note from J.P. Morgan, the commentary highlights that while the EM fixed income performance has rallied, signs of excessive positioning may lead to volatility. Upcoming geopolitical tensions and shifts in monetary policy in major economies could serve as catalysts for this crowded space moving forward.
EM Fixed Income: Summer catch-up as spreads catch-down
The desk argues that emerging market (EM) fixed income is poised for a significant catch-up as spreads begin to contract, reflecting a recovery in the asset class. Per the full note from J.P. Morgan, analysts Jonny Goulden and Ben Ramsey identify a favorable convergence of market conditions that could stimulate inflows into EM assets. Recent data indicates a tightening of spreads that points to a more optimistic market sentiment, potentially enhancing attractiveness for institutional investors.