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By Raza AGHA, Head of Emerging Markets Credit Strategy and Uday Patnaik, Head of Emerging Markets Debt, LGIM
2022 was a gruelling year for many asset classes. Could this year hold better prospects for emerging market credit? Last year was characterised by rising interest rates in developed economies, multi-decade highs in inflation, rising commodity prices and war between Russia and Ukraine. The combination of these factors hit emerging market (EM) credit hard, with the asset class posting negative returns of 15.0%[1] for 2022.
However, between October and the end of last year EM credit rallied c.9.3% . This has reduced potential returns for 2023 but, based on several assumptions rooted in incoming data and policy changes, we believe EM...
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