The outlook for emerging markets (EM) hard-currency corporate debt is positive, as the current compensation for holding EM hard-currency debt is significantly higher when compared with their US counterparts.

This fixed-income segment of EM hard-currency corporate debt is also attractive from an absolute perspective. Bond yields are approaching the highs of 2016, when EM economies suffered from a collapse of commodity prices. We believe that yields are not likely to rise significantly beyond current levels as the economic environment in EM is not as negative as it is perceived by many. Thus, EM hard-currency bonds offer a good source of income for bond investors with an attractive carry.

Investors looking to gain exposure to EM hard-currency debt, while eliminating the possibility of a capital loss at maturity, could consider our 3-year capital protected note with participation currently in subscription.