The recent flare up of risks in Argentina, and other emerging economies, has raised the spectre of a “classic” emerging market currency crisis. Given the improvement in fundamentals which has taken place over recent years, do opportunities remain in emerging market bonds?
Solid credit fundamentals, a moderate uptick in global economic growth with limited inflationary pressure and a favourable supply-demand balance all point to another good year for high yield bonds.
Global corporate bond valuations are elevated and insufficient to compensate for risk, but there will continue to be selective opportunities to take high conviction positions.
In today’s complacent and expensive bond markets, an active and flexible approach is needed. We look at where the risks and opportunities lie.