What Dwindling Inflation Means for Emerging Market Bonds

Emerging-market local currency bonds are offering spreads near their widest since 2011 over developed-market government debt, even after an almost 11 percent rally this year, according to a Bloomberg Barclays index. Dwindling inflation across many developing economies is offsetting the drop in nominal yields and making them attractive investments, according to Colin Dryburgh, an Edinburgh-based investment manager at Kames Capital Plc. While a stronger dollar poses a risk to holding local debt, many emerging-market currencies still offer value, he said.

— With assistance by Garfield Clinton Reynolds

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