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Emerging market bond funds draw over $17 billion in net inflows

The flow comeback follows three straight years of capital outflows, as improving sovereign credit quality and tighter policies in countries like Brazil and Colombia support higher inflation adjusted yields.

Reported · Written up by our desk · Debt Funds

Emerging market debt is regaining momentum after a three year period of capital flight, with emerging market bond funds drawing more than $17 billion in net inflows so far this year, according to ConnectCRE.

The renewed interest is being linked to improving sovereign credit quality and real yield appeal, as investors rotate toward higher yielding sovereign and corporate bonds while inflation slows across many developing economies.

ConnectCRE said the asset class remains sensitive to the U.S. dollar and geopolitics, but widening gaps in real interest rates between emerging and developed economies are boosting its relative value.

The outlet also pointed to past tightening cycles in countries including Brazil, Colombia, Indonesia and Egypt, noting that as inflation moderated while policy rates stayed elevated, investors may now find some of the highest inflation adjusted yields in global bond markets.

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