Strategic bond managers are taking short-term positions in emerging market debt after the summer sell-off brought valuations back down to attractive levels.
Outflows from emerging market debt funds from 23 May to 29 October amounted to approximately $28bn, after the Federal Reserve said it would start tapering its bond-buying programme sooner rather than later. Redemptions slowed when it became apparent in September tapering was off the cards for the time being, but inflows have not yet returned to EMD funds, despite an uptick in performance. For example, J.P. Morgan’s Emerging Markets Bond index, which is the bank’s most liquid US dollar emerging markets debt benchmark, is up 2.97% over the month to 28 October, though it is still down 3....
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