Emerging markets are making waves! Credit rating upgrades hit a decade high and growth is back on a solid footing. Even with the US elections stirring up potential volatility, the outlook for emerging market bonds remains bright, thanks to improved fundamentals and enticing yields.
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EM Sovereign Credit Rating Trend
Quarterly rating # changes – EMBIGD Sovereign Universe 
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EM Corporate Credit Rating Trend
Trailing 3m rating evolution rate, % 
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LHS Source: S&P, Moody’s, Fitch, BlackRock Aladdin, JPMorgan. Counts changes in foreign currency rating by S&P, Moody’s or Fitch, for sovereign issuers in the JPMorgan EMBIGD Index. As of 30 Sep 2024. RHS Source: BAML, S&P, Moody’s, Fitch. Shows trailing 3m net credit rating migration rate e.g. +1 value is equivalent to 1% of issuers in the universe upgraded by 1 notch by all 3 rating agencies, or +0.67 value if upgraded by 2 out of 3 rating agencies. As of 30 Sep 2024.
- Increasing signs that EM Fundamentals Have Turned a Corner.
- Credit Rating Upgrades are at a decade high across both EM Sovereigns and Corporates.
- Recent policy stimulus measures reduce downside risks in China; overall we expect a solid 2% growth pickup for emerging vs. developed markets next year.
- Looking beyond the US elections which may drive volatility in the short-term, the outlook for emerging market bonds is supported by improving credit fundamentals, tailwinds from global rate cut cycles, and attractive carry with current benchmark yields mostly in a 6-7% range.
Source: BlackRock Aladdin, Bloomberg, JPMorgan. As of 21 October 2024. Indices used: Bloomberg EM USD Aggregate 1-5 year Index (Short Duration EMD), JPMorgan EMBI Global Diversified Index (EMD Hard Currency), JPMorgan GBI-EM Global Diversified Index (EMD Local Currency), JPMorgan CEMBI Diversified Index (EM Corporates). YTM data is based on the weighted average yields of the index holdings.
