EMD: Valuations are up…but when capital flows reverse, currencies could weaken dramatically

Emerging Market debt

Michael Conelius, manager of the T. Rowe Price Global Emerging Markets Bond fund, and Andrew Keirle, manager of the T. Rowe Price Emerging Local Markets Bond fund, tell Investment Week why, as rates rise across the globe, they are focusing on corporate issuances

After a rough 2013, emerging market debt has rebounded sharply this year. What has accounted for this recovery? Conelius: EM debt was the one asset class that really underperformed in 2013. We saw some fairly indiscriminate outflows, just as we saw a headlong rush into EM debt in the aftermath of the financial crisis. So coming into 2014, EM debt was about the only asset class that you could say was cheap. Some of that cheapness was justified by a shaky geopolitical environment and economic vulnerabilities in certain countries, but the markets overreacted. As we worked through some o...