Weekly Newsletter

• EM bond funds absorbed US$1.1 billion, the strongest weekly intake in 12 weeks, with both hard-currency and local-currency funds attracting money and YTD inflows reaching US$33.9 billion.
• Hawkish central-bank commentary at Jackson Hole lifted the perceived probability of a September Fed hike from 36% to 60%, raising the risk that Treasury volatility offsets otherwise-supportive EM technicals.
• Sovereign credit outperformed corporates across every reported ex-Asia region, led by Latin America at +0.63%, while corporate returns compressed into a 0.17–0.23% band.
• Colombia was the week’s clearest volatility event as a revised 2027 budget revealed a 9.4%-of-GDP deficit, leaving CDS 8bp wider even as cash bonds retraced to roughly unchanged.
• September supply is the central technical risk, with roughly US$90 billion of further EM sovereign issuance forecast for the remainder of 2026 competing against heavy global IG demand.

Market Visualizer

Regional Credit Developments

Global EM Themes

• EM bond inflows rose to US$1.1 billion, split US$584 million into hard currency and US$516 million into local currency; ETFs contributed US$519 million and non-ETFs US$581 million, taking YTD EM bond inflows to US$33.9 billion.
• Broad hard-currency EM funds attracted US$598 million, while Asia ex-Japan hard-currency funds lost US$14 million.
• Local-bond inflows were geographically concentrated, with Hungary leading available non-resident inflows at US$92 million; in Asia dollar corporates a modest buying bias and rotation toward bonds longer than ten years saw China reverse to a 14% net inflow while Hong Kong, India and Singapore recorded net outflows.
• Sovereigns outperformed corporates across every reported ex-Asia region, with Latin America sovereign +0.63% (-3bp to 224bp), Middle East +0.54% (-8bp to 142bp), Africa +0.35% (-5bp to 285bp) and Europe +0.30% (-4bp to 187bp) against compressed corporate returns of 0.17–0.23%.

• Hawkish Jackson Hole remarks lifted the perceived probability of a September Fed hike from 36% to 60%, increasing the risk that Treasury volatility overwhelms supportive EM technicals.
• Mexico’s 2026 growth forecast was raised to 1.5% on firm external demand and industrial-policy traction, while Brazil is expected to slow from 4.5% annualized in 1Q to 2% in 2Q and toward 1% in early 3Q on high debt-service costs and a fading fiscal impulse.
• Policy divergence widened, with five of seven EMEA EM central banks expected to cut — Türkiye effectively lowered interbank funding rates by 300bp and is forecast to cut 100bp in both October and December, and Hungary is seen cutting 25bp in September — while Asia turned more hawkish as Korea and the Philippines raised rates and Thailand held on weak, uneven growth.

Regional Developments

• MENA stayed range-bound despite renewed US-Iran tension; GCC IG was slightly softer in cash with no broad spread pressure, while higher oil supported exporters and wider bid-offer spreads reflected a geopolitical premium amid an empty near-term pipeline.
• Bahrain’s 2033 sukuk tightened about 10bp in z-spread and its 2028 and 2038 conventional bonds tightened roughly 20–25bp, while Oman’s January 2028 bond outperformed the October 2027 point by around 25bp on thin liquidity.
• Over five sessions the high-grade, high-beta, HY and AT1 baskets tightened 1.6bp, 8.1bp, 2.2bp and 5.6bp respectively, with MENA HY range-bound and AT1s broadly unchanged to slightly lower.
• African sovereign technicals improved, with duration extension in Angola, better belly buying in Kenya, two-way flow in Nigeria and a South African curve 1–3bp tighter alongside CDS 0.5bp tighter.
• Kenya was affirmed at B/B with a Stable outlook on stronger reserves and exchange-rate stability, while Ethiopia’s official creditor committee judged the restructuring terms for its US$1 billion 2024 Eurobond compliant with comparability-of-treatment requirements.
• Cameroon’s 2033 bond gained 0.32 cents to 98.51 as its yield fell to 9.18% after the president returned from a prolonged absence, and Ghana’s banking-system capital ratio rose to 20.4% in June from 10.6% a year earlier, with all 23 banks fully capitalized.

• Ukraine traded down 0.25 points before finishing 0.125 points higher amid balanced activity.
• Poland was the principal weak point on renewed Russian-escalation concerns, with hard-currency bonds widening roughly 1–2bp and local bonds about 6bp, while Latvia and Lithuania also saw net selling.
• Türkiye’s foreign carry exposure fell US$1.2 billion over two weeks to US$48.7 billion, still well above the roughly US$40 billion pre-conflict level, with short-term foreign positioning near US$60 billion including money-market funds; net FX reserves excluding swaps rose to about US$54 billion and gross reserves reached US$191 billion.

• Colombia’s revised 2027 budget revealed a 9.4%-of-GDP deficit and a planned 2.2 percentage-point primary adjustment; cash traded 4–6bp wider and CDS as much as 6bp wider before cash retraced to roughly unchanged, though CDS closed 8bp wider with more than US$200 million traded in the final hour.
• Argentina stabilized after meaningful underperformance as passage of central-bank charter reform and the Fiscal Innocence bill through the Lower House triggered a 25–50 cent opening rally and a curve close about 20 cents higher, leaving bonds still down roughly 4 points and 100bp wider month-to-date.
• Braskem filed for an out-of-court restructuring; Fitch upgraded Brava Energia to BB from BB- following Ecopetrol’s acquisition of control; Fitch removed Rumo from Rating Watch Negative but assigned a negative outlook; and Petrobras announced redemption of its 5.9% 2028 notes.

• JACI gained 0.12%, with sovereigns returning 0.29%, quasis 0.13% and corporates 0.06%, and Pakistan led country returns at 0.58%.
• China IG lost 0.03% as a 4bp widening in spread-to-Treasury to 67bp overwhelmed seven-year Treasury gains, with technology long-end bonds widening on concerns over the size and duration of AI capex and reported hedge-fund shorting on prospective supply and sanctions risk.
• China financial spreads widened 5bp versus only 1bp for Asia financials overall, while Asia gaming returned 0.17% with spreads tightening 4bp to SOT+188 across both IG and HY.
• SoftBank hybrid bonds fell as much as 2.5 points after potential US$10–20 billion refinancing headlines.

Primary Markets

• Through August 27, EM corporate issuance totaled US$6.9 billion WTD, of which US$6.8 billion was IG and effectively zero was HY; Asia supplied US$4.9 billion, Emerging Europe US$1.1 billion, Middle East and Africa US$0.9 billion and Latin America none, taking YTD corporate issuance to US$357.1 billion.
• Approximately US$12 billion of India IG-bank supply already exceeded the roughly US$6.5 billion issued in all of 2025, yet most deals performed and high-quality five-year bank spreads held near +95–100bp, while the broader Asia primary market raised US$2.4 billion entirely in IG.
• September supply is the central technical risk, with roughly US$90 billion of further EM sovereign USD/EUR issuance forecast for 2026 and US$50 billion of net issuance during September–December, historically led by EEMEA and competing with heavy US hyperscaler financing for global IG demand.

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