Emerging market credit: Liquidity in a new era
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How are higher rates and fixed‑income inflows reshaping emerging market credit liquidity?
Hello and welcome to JP Morgan's Making Sense. I'm Meridi Cleary from the Fick Market Structure and Liquidity Strategy team. Today's episode focuses on emerging market credit, which is navigating a very different landscape than even a few years ago, driven by inflows, a shifting investor base, and greater data availability. To discuss how these themes are shaping liquidity, I'm pleased to be joined by James Banghart, Global Head of EM Credit Trading at JP Morgan. James, thanks so much for being here.
Thanks, Murray. Thanks for having me.
So James, let's start with the backdrop here. With higher rates driving more inflows into fixed income, emerging markets have broadly benefited alongside a growing set of international investors seeking local market exposure. At the same time, recent volatility events have tested liquidity NEM. So focusing on emerging market credit trading, how has the Middle East conflict over the past two quarters impacted EM credit trading from your perspective, James?
Sure. I you know, I'd say for us, the sort of interesting thing has been the you had the sort of the start of the kinetic side of the Iran war and end of February, and then you had a lot of issuance prior to that kicking off, and then you came into March, and there was post the war, there was I think there was basically no issuance in March. So you had very little issuance. You also had a sell off in rates, which meant there was a lot more money coming into fixed income generally, which we saw across the board, and EM benefited from that as well, which meant there was just a lot of money around and there wasn't really anywhere for it to go because the issuance hadn't happened. So you had an initial movement spreads wider, but then that's sort of ground back down just because the wall of money coming in.
Has created a bit of an issue overall. The other thing that happened is you, you know, we sort of looked at it in the first couple of weeks. You felt that, you know, the Middle East was really going to suffer from a credit perspective. And it never really played out, actually. There was, there was still a lot of money sort of trying to find home and sort of looking at the opportunities from the Middle East perspective rather than looking at the risk side of things.
What impact did the recent Middle‑East conflict have on EM credit issuance and spreads?
And then the sort of other dynamic that's played through is that China's been sort of a large saver for a long time and a large exporter of capital. And given the lack of issue. From Chinese issuers in dollars, generally given, you know, the geopolitical realities of the ground and China's sort of de-emphasizing the dollar across the board, the ability for them to export into the Middle East has been sort of the one saving grace for them in terms of investing. But that stopped when the war kicked off in February. So China's been very quiet in terms of investing in the Middle East for the last few months. You know, that's put a lot more pressure in the local markets in China as far as where does the money go and
You know, I'd say the overwhelming thing is that rates being higher has driven more money to fixed income. That's created of just a backlog of cash around.
Interesting. And I guess to your point, how has the EM credit investor base evolved over the last few years?
In EM credit, you have the real money investor base, which has been growing and been consistent through a number of years. And a lot of that's the Jake Morgan and MB Index based tracking uh investor base. Then there's been the growth of the hedge fund pods, which has been true for the last two or three years. That's obviously been true across all markets. That's created a dynamic where the pods tend to trade the same way. So they tend to be it exacerbates local moves. The bigger thing in EM that's been true for the last sort of 12 to 18. Months has been, there's been a growth in local markets. So, you know, you've got the Middle East, which has had its own investor base, which has grown a lot, mainly because with oil prices where they were, there was a lot of money coming in.
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Chapters
8 chapters
1
How are higher rates and fixed‑income inflows reshaping emerging market credit liquidity?
0:03–1:52
2
What impact did the recent Middle‑East conflict have on EM credit issuance and spreads?
1:52–3:22
3
Which investor groups are driving the growth of the EM credit market today?
3:22–5:03
4
How is portfolio trading being adopted in EM credit and what are its main use cases?
5:03–6:34
5
Why are ETFs becoming a core hedging tool for EM credit traders?
6:34–8:06
6
How will the new EU and UK bond‑transparency rules affect EM credit pricing and flow?
8:06–9:45
7
What role is private credit playing in emerging markets and how is it evolving?
9:45–11:05
8
What are the key takeaways on liquidity, data, and future trends for EM credit?
11:05–12:37
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