HSBC: Selectivity Key for EM Bonds as Fed Path Clouds Outlook

HSBC Asset Management reported that emerging market local-currency bonds have delivered strong returns over the past four years, underpinned by credible policy settings and attractive real yields. The firm noted, however, that year-to-date performance has softened.

This pullback comes as US Treasury yields have risen and the real rate differential between EM and US debt has compressed, challenging the asset class.

HSBC highlighted that selectivity remains key for navigating the cross-currents created by an uncertain Federal Reserve rate path.