Dispelling myths in emerging market debt

Improvements in fiscal competence and policymaking are transforming perceptions of emerging market debt. 

Emerging market debt has its origins in the 1990s, when defaulted sovereign bank loans were restructured into tradable hard currency (US dollar) bonds known as Brady bonds. The asset class has grown hugely since then – many more issuers have come to market and total assets have boomed (see Exhibit 1). Yet some negative attitudes formed in the early days of the asset class have proved persistent, even though they no longer reflect reality. In this article, we will puncture some of the myths about emerging market debt.