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Emerging Market Debt
- 07 October 2025
- 5 MIN READ
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Emerging Market Debt stands out in 2025, offering compelling yields and diversification. With improving credit quality and supportive macro trends such as a weaker USD and healthier EM fiscal positions, this outlook note explores whether this asset class can help enhance overall portfolio resilience and return.
Key takeaways
01
As an asset class, Emerging Market Debt offers a higher yield as well as benefits of diversification. Enhanced fiscal discipline, declining debt-to-GDP ratios, and healthier current accounts of emerging market economies make a strong case for EM debt.
02
A weakening U.S. Dollar also provides support for EM central banks to have a reduced cost of borrowing and allows them to cut rates without being concerned about the negative currency impact.
03
EM debt yields are currently at attractive levels and central banks have started their cutting cycle. Inflation in most EM markets is within target levels and a weak U.S. Dollar could potentially help further towards keeping inflation in check.
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