Weekly Updates

• EM credit finished the week firmer as aggregate spreads tightened and high yield outperformed investment grade amid improving quarter-end risk appetite.
• Fund flow momentum weakened materially, with EM bond flows slipping to -US$67mn after several weeks of inflows.
• Lower oil prices remain the dominant macro driver, easing inflation concerns and supporting a more dovish policy bias across several EM economies.
• Primary markets remained exceptionally active, with June EM corporate issuance reaching approximately US$70bn, the second-highest June total on record.

Market Visualizer

Weekly Snapshot: Key Drivers & Regional Flows

Regional Credit Developments

Global EM Themes

• EM bond fund flows deteriorated to -US$67mn from +US$614mn previously as hard-currency inflows slowed sharply and local-currency funds recorded outflows.
• Flow momentum has weakened across both hard-currency and local-currency segments, with ETF demand softening while actively managed funds remain relatively resilient.
• Investor demand continues to favour carry opportunities rather than broad-based spread compression.

• Falling oil prices and reduced Middle East tensions have improved the EM inflation outlook, prompting a more dovish central-bank bias across EM.
• A more hawkish Federal Reserve path and a stronger US dollar remain the primary external risks for EM assets.
• Asia remains the most exposed EM region to renewed Fed tightening and USD strength, while Eastern Europe appears comparatively insulated.

Regional Developments

• Bahrain bonds declined roughly 0.5–1.1 pts and CDS widened amid concerns surrounding reserve adequacy and reliance on external support.
• Egypt outperformed peers after a US$1.64bn IMF-linked staff-level agreement, with sovereign spreads tightening despite broader market volatility.
• Ethiopia rallied around 3 pts after reaching an agreement in principle with bondholders and making additional progress in IMF negotiations.
• Senegal underperformed with sovereign bonds down approximately 1.25–1.75 pts due to IMF discussions and debt-reporting concerns, while Kenya also lagged despite World Bank support.
• Lower oil prices are expected to support disinflation across several African economies, while Angola and Mozambique traded firmer during the week.

• Lower energy prices have improved the monetary backdrop across much of Eastern Europe and supported a more dovish policy outlook.
• Ukraine gained roughly 1.25–2 pts and ranked among the strongest regional performers despite persistent military headlines.
• Georgia benefited from a Moody’s outlook revision to Stable, while Romania continues to outperform fiscal targets.
• Hungary drew investor attention after comments suggested the 2026 fiscal deficit could exceed 7%.

• Regional credit performance remained constructive, benefiting from lower oil prices and stronger global risk sentiment.
• Argentina outperformed, with sovereign bonds advancing approximately 0.125–0.75 pts over the week.
• Colombia tightened modestly as markets focused on fiscal developments and a surprise 75bp policy rate increase to 12%.
• Latin America appears less vulnerable to Fed tightening than in prior cycles due to stronger currencies and relatively contained inflation.

• Asia credit continues to face pressure from elevated issuance, higher Treasury yields and mixed fund flow dynamics.
• Asia investment-grade spreads widened during June as heavy supply coincided with hawkish Fed repricing expectations.
• Indonesia and Philippines sovereign curves widened during the week amid broader risk repricing across the region.
• US tariff developments remain a key risk for regional growth, while the World Bank upgraded Sri Lanka and Vietnam to upper-middle-income status.

Primary Markets

• June EM corporate issuance accelerated to approximately US$70bn, marking the second-highest June issuance volume on record.
• Asia led issuance activity with roughly US$32bn, followed by Middle East & Africa (US$18bn), Emerging Europe (US$13bn) and Latin America (US$7bn).
• Upcoming local-currency government bond supply remains heavy across Asia, EMEA, Latin America and frontier markets.

DISCLAIMER

This document is strictly confidential and is being provided to you for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any securities or financial instruments. The information contained herein has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.

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