Emerging markets debt holds firm amid rising geopolitical tensions

Emerging markets (EM) debt began 2026 with solid momentum, supported by favourable macro conditions and strong country fundamentals—themes that carried over from 2025. Gains in January and February were driven by a weaker US dollar, high real yields, spread tightening and resilient country-level fundamentals. However, those early gains reversed in March after US and Israeli strikes on Iran in late February sparked volatility across EMD assets. EM currencies broadly weakened against a strengthening USD, local rates came under upward pressure, and credit spreads widened across select sovereign...