Report published September 30, 2026
Emerging Market Local Currency Bonds: The Opportunity from Here – Ashmore
Ashmore Investment Management Limited · September 30, 2026
Emerging market local currency debt combines an average investment-grade rating with real yields hovering near 15-year highs at 3.4%. With EM currencies historically undervalued and foreign ownership depressed, the asset class offers compelling asymmetric upside.
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Finvaulta summarizes Ashmore Investment Management Limited's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
Key Takeaways
- 1.EM local currency bonds offer an investment-grade average profile (79% IG) alongside attractive nominal yields (6.5%) and ex-ante real yields near 15-year highs (3.0%–3.4%).
- 2.Off-benchmark sovereign markets and dispersion across countries offer high alpha potential, with off-benchmark average nominal yields near 10.5% and ex-ante real yields of 4.0%.
- 3.EM FX risk is structurally skewed to the upside due to an overvalued US dollar, heavy US twin imbalances, and proactive monetary discipline from EM central banks.
Table of Contents
- EM LC bonds are investment grade on average, but high yield opportunities exist
- The opportunity is not limited to the benchmark
- Defaults are rare
- EM FX risk outlook skewed positive
- Opportunities are varied
- Key Risks: El Niño and continued Hormuz supply shock
- Performance has gone unnoticed
- Conclusion
Report data
Fig 7: EM Debt Scenarios — as of September 22, 2026.
| Metric | Estimate | Context |
|---|---|---|
| EM Local Currency Eligible Debt Stock | 14.0 USD trillions | Total outstanding debt stock of eligible GBI-EM GD countries. |
| GBI-EM GD Investment Grade Share | 79.0% | Proportion of benchmark assets rated investment grade. |
| GBI-EM GD Real Yield | 3.4% | GBI-EM GD yields net of index weighted inflation. |
| GBI-EM GD Yield-to-Maturity | 6.5% | Nominal yield of the GBI-EM GD benchmark. |
| Off-Benchmark EM Average Nominal Yield | 10.5% | Simple average nominal 1-year government bond yield in off-benchmark EM countries. |
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