@Generali Investments.
Emerging market (EM) and frontier bonds stand poised to deliver substantial value for those ready to explore their full potential, says Witold Bahrke, Senior Macro & Allocation Strategist at Global Evolution, part of Generali Investments.
In particular, frontier markets can offer a compelling role in fixed income portfolios, given their high yields combined with low duration.
• Despite the challenges posed by weak global growth, global easing policies create fertile ground for positive EM and frontier market bond returns, which are expected to outperform developed market high yield bonds.
• The combination of reduced macro-financial risk and improving growth-inflation points to better risk-reward profiles in EM bonds going forward, which can help offset slowing growth in China.
• Frontier markets offer high yields with relatively low volatility, partly due to factors like lower duration and significant local investor bases, which helps to hedge against geopolitical as well as inflation risks, but also improves liquidity in periods of global financial stress.
