Emerging Market Bond Top List and Themes

UBS maintains an attractive view on emerging market bonds, expecting high single-digit returns over the next 12 months supported by solid fundamentals and carry. However, they emphasize the need for selective bond picking due to tight valuations and inflation-driven rate volatility.

Key Takeaways

• 1.EM bonds have recovered from the US-Iran conflict disruption following a ceasefire in early April, with spreads returning to pre-conflict levels.
• 2.The CIO maintains an 'Attractive' view on EM bonds, forecasting high-single-digit returns over the next 12 months driven by high yields and anticipated Federal Reserve rate cuts.
• 3.Selectivity is critical due to tight valuations and persistent inflation risks; UBS recommends focusing on quality, short-to-medium duration, and domestic-focused issuers.

Table of Contents

• Focus on the Fed
• Selectivity and investment discipline is key
• Swift rebound for Asian credit following ceasefire
• Changes to our bond selection in Emerging Market Top List
• Position for tariff uncertainty with EM domestic bonds
• Opportunities in sukuk
• Opportunities in EUR-denominated bonds
• Opportunities in short- and medium-term bonds

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