Emerging market credit spreads are tightening while developed markets' are widening. This divergence is not a fundamental mispricing but is explained by unique, positive developments in specific sovereigns like post-election Argentina and bonds in Venezuela on hopes of restructuring.
Emerging market central banks' hawkish commentary while cutting rates reinforces market stability. This low volatility, in turn, gives them confidence to continue the cutting cycle. This feedback loop can make low-volatility periods surprisingly persistent, as the actions and outcomes mutually reinforce each other.
The link between emerging market currencies (EMFX) and US tech stocks is not about the tech sector itself. Global equity markets have become a unified signal for the global economic cycle. A sell-off worries investors about global growth, impacting risk-on EM currencies regardless of their direct tech exposure.
The surge in emerging market sovereign debt isn't uniform. It's heavily influenced by specific situations, such as Mexico issuing massive debt to back its state oil company, Pemex. Additionally, a notable increase in issuance from lower-rated 'Single B' sovereigns indicates renewed market access for riskier credits.