“Spillovers from rising US back-end rates to EM rates might be lower this time around” due to the effect of the weakening greenback, Goldman Sachs Group Inc. strategists including Kamakshya Trivedi and Danny Suwanapruti wrote in a recent note. Higher-yielding EM bonds will tend to benefit more from this environment, they added.
Riskier emerging-market bonds may continue to beat their lower-yielding peers as the dollar’s slide softens a rise in Treasury yields, protecting investor returns, according to analysis by Bloomberg.
Debt from India, Indonesia, Brazil and South Africa has outperformed EM peers since April 2, when US President Donald Trump shocked global markets with his tariffs. The dollar rose in the four previous instances since 2021 when 10-year emerging-market bonds reacted to a rise in US benchmark yields. This time, however, the dollar has fallen, allowing currency returns to compensate for the duration spillover impact from higher US yields.
