Four Reasons to Revisit EM Corporate Short Duration Debt
Against a potentially higher-for-longer backdrop, a short-dated approach to EM corporate debt can provide an opportunity to pick up income, incremental yield and diversification, with less volatility.
It has undoubtedly been a volatile few years for emerging markets (EM), given the impact of rising developed market interest rates, global geopolitical tensions, and China’s real estate meltdown. But with EM corporate bond valuations having rebounded year-to-date, investors are rightly turning back to the asset class and questioning whether opportunities still exist.
The answer in our view is yes, and we believe there is a strong case to be made for short-dated debt in particular. EM corporate short duration debt , which typically has a duration of under three years, not only offers the potential for compelling value and attractive yields, but also positions investors to maximize income through a ‘coupon clipping’ strategy—all with less volatility.