The U.S. Federal Reserve (Fed) has begun raising rates, spurring concerns about the impact on fixed-income returns. Should emerging markets (EM) debt investors be concerned, or could this be a buying opportunity?

In this series—based on our paper—we examine the three previous tightening cycles that occurred during the life of this asset class to gauge the potential impact of the rate hikes on EM sovereign debt returns over the next 12 months and beyond.

We consider a key fear driving concerns about the future returns of EM sovereign debt. We then assess the legitimacy of each fear when compared to the three most recent Fed rate-hiking cycles: 1999 to 2000, 2004 to 2006, and 2015 to 2018.

Because each of these past rate-hiking cycles differs in length, speed, and, more importantly, the context in which the tightening took place, we investigate the key differences as well as similarities that are likely to be important drivers of performance.

Daniel Wood
Portfolio Manager

Marco Ruijer, CFA
Portfolio Manager

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