• The first five weeks of 2024 have produced an early winner for emerging-market traders: corporate bonds denominated in US dollars.
• That type of debt is yielding higher returns than most other asset classes within the EM universe, translating into annualized gains of 12% in US currency terms, according to data compiled by Bloomberg. The bonds are outperforming US corporate notes, narrowing the yield spread to the lowest since June 2021.
• Prices are jumping due to a dearth of EM corporate bonds in secondary trading. There’s been fewer issuances than expected, unlike sales of sovereign bonds that saw the most active January in three years. Companies are under little pressure to raise dollar debt as refinancing needs have moderated and other fundraising avenues, such as local-currency debt, open up. Some companies are returning capital to bondholders by buying back their debt.