What are the risks to emerging market debt?

There are attractive investment opportunities among high-yielding emerging market (EM) eurobonds in our view, writes Koon Chow, an EM macro and FX strategist at Union Bancaire Privée (UBP).

However, EM bond prices fell in November; attributable to some investor neglect of improving EM credit fundamentals and misunderstanding of the impact of a Trump presidency. Investors seem to be anticipating a Trump presidency as helpful for the US economy (with tax cuts, de-regulation, and higher infrastructure spending) and as detrimental for EM because of expected faster Federal Reserve hikes and higher treasury yields. We have a different view for the following reasons, however.  Take spread cushion in EM. Historically when US treasury yields have increased, EM eurobond yields ...