Tristan Sones is vice-president, portfolio manager and co-head of fixed income at AGF Investments Inc.
This latter aspect of the crisis may be troubling for fixed income investors who have come to rely on EM debt to find attractive yields. However, there are still outposts of potentially higher fixed income returns in the developing world, though an investor might have to go further afield to find them.
The COVID-19 environment might now be presenting some short-term opportunities to make such long-term plays, if only because it has made frontier-market debt prices more attractive. Monetary policy has helped to prop up bond prices, lowering yields across the spectrum, but the impact has not been evenly distributed. While U.S.
Against these headwinds, however, is a potential tailwind – in the form of multilateral debt assistance. More than 90 countries have applied to the International Monetary Fund for emergency financing, and the IMF has approved an expansion of its emergency fund to meet an expected US$100 billion in demand. The IMF also noted recently that a handful of countries, including frontier markets Madagascar and Kyrgyzstan, have been approved and more are likely to follow.
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