Market Turmoil Breaks Years of Junk Debt Outperformance in EM

A plunge in global risk appetite is pushing emerging-market investors into higher quality dollar bonds, signaling a years-long rally in junk debt from developing nations might be at an end.

Money managers from Pinebridge Investments to T. Rowe Price and TCW Group are scooping up sovereign notes from countries including Mexico, Colombia and South Africa, touting their high liquidity, market access and fair valuation. Names rated around BB and BBB, they say, are well-positioned to benefit from falling US Treasury yields and withstand persistently high borrowing costs that may impact their riskier peers.