Weekly Newsletter

• EM bond inflows accelerated to US$823mn as investors continued allocating toward higher-yielding non-dollar assets despite rising U.S. Treasury yields.
• Long-dated Treasury yields reached their highest levels since 2007, but EM credit spreads remained resilient as carry and fundamentals outweighed duration concerns.
• Growing focus on U.S. fiscal sustainability helped support gold, Bitcoin, EM credit and other assets linked to the broader debasement narrative.
• Corporate fundamentals remained healthy with stable leverage, contained default risk and continued demand for new issuance across major EM regions.
• AI-related investment spending continued to support parts of EM Asia through semiconductor, infrastructure and power-sector demand.

Market Visualizer

Regional Credit Developments

Global EM Themes

• Aggregate EM bond fund inflows accelerated to US$823mn from US$356mn the prior week, with both hard-currency and local-currency strategies attracting fresh capital.
• ETF participation remained constructive with US$360mn of inflows, reinforcing demand for carry-oriented exposure despite elevated rate volatility.
• Spread performance remained considerably more stable than duration performance as investors focused on income generation rather than directional rate positioning.

• The dominant macro theme was growing investor concern around persistent U.S. fiscal deficits, rising debt burdens and long-term financing requirements.
• Treasury yields continued rising with the 30-year yield briefly reaching 5.31%, its highest level since 2007.
• Gold, Bitcoin and EM assets advanced together, highlighting continued demand for diversification away from traditional dollar exposures.
• A weaker U.S. dollar backdrop remained supportive for EM local currencies, carry trades and commodity-linked economies.

Regional Developments

• Sovereign financing conditions remained generally supportive as strong market technicals continued offsetting the impact of higher global rates.
• Frontier sovereigns continued benefiting from improving risk appetite and sustained investor demand for higher-yielding credit exposure.

• Market participants increasingly focused on relative-value opportunities as policy normalization and stabilization trends continued across selected sovereign credits.
• Investor attention remained centered on macro stability, external financing dynamics and sensitivity to shifts in global rate expectations.

• Commodity-linked sovereign and corporate credits continued drawing support from the broader weakness in the U.S. dollar and resilient global liquidity conditions.
• Carry-oriented strategies remained attractive as investors sought spread income while avoiding excessive duration exposure.

• AI-driven capital expenditure continued supporting semiconductor supply chains, technology exporters and digital infrastructure providers.
• Technology-oriented issuers remained key beneficiaries of continued investment into data centers, computing infrastructure and power networks.
• Although growth concerns persisted in parts of the region, AI-related demand provided an important offset for medium-term credit fundamentals.

Primary Markets

• EM corporate issuance reached approximately US$348bn year-to-date, with full-year volumes projected near US$460bn.
• Additional EM sovereign issuance of roughly US$90bn is expected through year-end, although relatively light redemption schedules continue supporting market absorption.
• Asia remained the dominant source of corporate issuance as borrowers continued taking advantage of constructive demand conditions.
• New issuance continued to be well absorbed across both sovereign and corporate markets despite elevated benchmark rate volatility.

GEMBRIDGE CAPITAL

www.gembridgecapital.com

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