Opportunities in EM EUR Sovereign Bonds

This document is a report that discusses the performance and outlook of emerging market (EM) sovereign bonds denominated in euros (EUR) compared to those in US dollars (USD). It outlines recent trends indicating that EM EUR sovereign debt has outperformed EM USD debt in terms of spread and return, although this trend is not expected to continue. The report presents a central scenario forecasting a better total return for EM USD debt over the next six months, with expected returns of 3.7% for EM USD compared to 2.5% for EM EUR. The document also highlights specific opportunities in the EM EUR space, noting that certain bonds, particularly from Romania, still offer attractive yield pick-ups over their USD counterparts. Additionally, it discusses the supportive technical factors for EM EUR bonds in the upcoming years, including expected increases in EUR issuance and redemptions. The report concludes with an analysis of the market dynamics affecting these bonds, particularly in relation to global economic conditions.