Market volatility has increased in recent weeks, particularly in bond markets. The MOVE index, a measure of expected volatility in US Treasuries, has been rising significantly, decoupling from the VIX equity volatility indicator in an unusual move. This is significantly different from the March volatility spike that affected both markets at the start of the Iran war.
In September, global bond markets came under pressure amid inflation concerns and hawkish shifts by central banks, while equity markets remained relatively calm, supported by strong economic data and earnings, alongside renewed optimism around AI.
The EM debt universe is larger, more diverse and higher quality than many investors perceive, offering compelling opportunities today. Given the uncertainties ahead, investors may benefit from taking a blended approach.