{"id":99045,"date":"2025-07-24T00:00:00","date_gmt":"2025-07-24T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/2025\/07\/24\/waning-trust-in-us-treasuries-drives-record-demand-for-em-bonds\/"},"modified":"2025-07-24T00:00:00","modified_gmt":"2025-07-24T00:00:00","slug":"waning-trust-in-us-treasuries-drives-record-demand-for-em-bonds","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2025\/07\/24\/waning-trust-in-us-treasuries-drives-record-demand-for-em-bonds\/","title":{"rendered":"Waning trust in US Treasuries drives record demand for EM bonds"},"content":{"rendered":"

EM debt is getting cheaper: <\/strong>Strong demand for emerging market (EM) debt has pushed borrowing costs for highly-rated issuers to their lowest levels relative to developed markets since 2007, the Financial Times<\/a> reported yesterday. Faith in traditional safe havens has faded over the year, due to the Trump administration\u2019s erratic trade policies, the salmon colored paper said.<\/p>\n

By the numbers:<\/strong> Government bond spreads over US Treasuries have dropped to 1.04 percentage points, their lowest level since 2007, while corporate debt spreads have narrowed to 1.1 points, below pre-Trump\u2019s election levels. <\/p>\n

The push factors: <\/strong>The shift is being fueled by Trump\u2019s political pressure on the Federal Reserve and mounting concerns over the high levels of US government debt. \u201cThe safe assets aren\u2019t as safe as they used to be,\u201d the Bank of America\u2019s head of global EM fixed-income strategy David Hauner told the paper.<\/p>\n

The pull factors: <\/strong>Other than the attractive yields, the appeal of EM is underpinned by a growing appreciation for the improving economic health and credit quality. The market is being supported by increased bond issuance from stable, highly-rated Gulf states and economic reforms in other developing nations like Argentina and Pakistan. EM bonds have also been \u201cunder-owned\u201d for many years, suggesting there is still substantial capacity for future investment and growth, Hauner said.<\/p>\n

Macro winds are blowing in the EM\u2019s favor:<\/strong> A high appetite for risk, spurred by \u201csuperstrong\u201d global equities, is leading investors to overlook trade war concerns and focus on positive fundamentals like a weaker USD and Chinese growth, the FT cites unnamed Citi analysts as saying.<\/p>\n

BUT- The current optimism for EM leaves little room for error<\/strong>, posing big risks if the global economy slows or if US inflation rises, JP Morgan\u2019s head of EM fixed-income strategy Jonny Goulden told the FT.<\/p>\n

ALSO FROM PLANET FINANCE-<\/p>\n