![\"\"](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/09\/figure-1-strong-emd-perf-1100x550.png\")
<\/figure>\n\n\n\nSource: Bloomberg Finance L.P, JP Morgan, as of September 1, 2025. Past performance is not a reliable indicator of future performance. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable. <\/p>\n\n\n\n
Hard currency bonds (as measured by JPM-EMBI GD) have also proved robust performers, delivering a return of 8.7% for the first eight months of 2025 (Figure 2). Of that, the Treasury component contributed 4.7%, while 3.8% came from spread compression and carry. By country, Mexico was among the best performers \u2014 the Mexican yield curve is well defined with duration that is about one year longer than the index. Elsewhere, Ecuador\u2019s bond market has benefited from the easing of political uncertainty as President Daniel Noboa was re-elected following a second round of voting in April.<\/p>\n\n\n\n
Figure 2: Hard currency returns gather momentum in 2025<\/p>\n\n\n\n Source: Bloomberg Finance L.P., JP Morgan as of August 31, 2025. Past performance is not a reliable indicator of future performance. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable.<\/p>\n\n\n\n Hard currency bonds (as measured by JPM-EMBI GD) have also proved robust performers, delivering a return of 8.7% for the first eight months of 2025 (Figure 2). Of that, the Treasury component contributed 4.7%, while 3.8% came from spread compression and carry. By country, Mexico was among the best performers \u2014 the Mexican yield curve is well defined with duration that is about one year longer than the index. Elsewhere, Ecuador\u2019s bond market has benefited from the easing of political uncertainty as President Daniel Noboa was re-elected following a second round of voting in April.<\/p>\n\n\n\n We maintain our positive stance on prospects for emerging market debt, even as market volatility and macroeconomic uncertainty remain features of the investment landscape. Several external and internal factors reinforce our constructive outlook, which is underpinned by our overall house view of the global economy. That view concentrates on developments in the United States, where, despite a whirlwind of tariff headlines and geopolitical uncertainty, we envisage a soft economic landing that is complemented by three Federal Reserve rate cuts this year.<\/p>\n\n\n\n Within the emerging markets universe, we anticipate looser monetary conditions to evolve as the impact of tariffs dampen inflationary pressures via weaker output growth and forced consolidation. The weaker US dollar further bolsters this assessment as this currency dynamic has historically been supportive of strong returns in EMD \u2014 and has been evident in performance this year. While some low-income countries in the EM universe are grappling with debt service burdens and the overall EM debt-to-GDP ratio has risen, the comparison with developed markets continues to be favorable (Figure 3).<\/p>\n\n\n\n![\"\"](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/09\/figure-2-hard-currency-r-1100x550.png\")
<\/figure>\n\n\n\nWe retain a constructive outlook for EMD<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/09\/figure-3-less-fiscal-str-1100x550.png\")
<\/figure>\n\n\n\n