Where Supply Meets Demand

Summary of EM Fixed Income Flows Update Industry Overview - The report focuses on the Emerging Markets (EM) fixed income sector, detailing fund flows, credit issuance, and ESG (Environmental, Social, and Governance) bond issuance. Key Points Fund Flows - EMDD funds experienced outflows of US$288 million this week, a significant decrease from US$2.7 billion in the previous week [2] - Hard currency fund outflows decreased to US$733 million from US$2.3 billion [3] - Sovereign fund flows remained nearly flat with outflows of US$62 million [3] - Corporate funds saw outflows drop to US$415 million from US$2.2 billion [3] - ETFs reverted to outflows of US$135 million from inflows of US$140 million [3] - Local currency fund flows improved to inflows of US$102 million from outflows of US$511 million [4] - Year-to-date returns for hard currency and local currency stand at 8.5% and -0.1%, respectively [5] Credit Issuance - Total EM credit issuance this week was US$6.3 billion, up from US$2.8 billion last week [5] - Sovereign issuance accounted for US$2.5 billion, bringing year-to-date sovereign issuance to US$188.1 billion, which is an increase of US$53.7 billion compared to the same period in 2023 [6] - Notable sovereign issuers included Nigeria and Korea, with Nigeria issuing US$700 million and US$1.5 billion in 2031 and 2034 bonds, respectively [6] - Potential future issuers include the Philippines, Mexico, and Morocco [6] ESG Issuance - This week saw US$0.3 billion in ESG-labelled bond issuance in EM, bringing year-to-date ESG issuance to US$127.4 billion [7][15] Additional Insights - The report indicates a shift in regional fund flows, with AxJ (Asia ex-Japan) seeing inflows of US$332 million, while LatAm (Latin America) and CEEMEA (Central and Eastern Europe, Middle East, and Africa) saw outflows of US$27 million and US$2 million, respectively [5] - The overall trend indicates a recovery in local currency inflows and a stabilization in hard currency outflows, suggesting a potential shift in investor sentiment towards EM assets [4][5] Conclusion - The EM fixed income market is showing signs of recovery with improved local currency inflows and a significant reduction in outflows from hard currency funds. The increase in sovereign issuance and ESG bonds also reflects a growing interest in sustainable investment opportunities within the EM landscape.