Summary

• Many emerging markets (EMs) offer higher real interest rates and strong policy credibility.
• Despite solid fundamentals, a strong U.S. dollar has often obscured the underlying return potential of EM local currency debt.
• Investors may not need a weaker dollar—just a less challenging currency backdrop—to unlock the asset class’s appeal.

For years, EM local currency debt has been one of the most misunderstood segments of the fixed income market. It can offer attractive yields, exposure to economies growing faster than many developed markets, and diversification benefits that can complement traditional fixed