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EM debt: The cruellest cut

Insight
14 June 2022 |
Active ESG
Why does emerging market debt (EMD) generally receive a lower credit rating than its developed market counterparts – even on ostensibly like-for-like issuance? Here, portfolio managers Jason DeVito and Mohammed Elmi explore the thorny issue of the EMD ratings haircut.
EM debt: The cruellest cut

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  • Historically, EMD is one of the few fixed income market segments to have consistently delivered a positive yield with some cushion to movements in core rates.

  • Even so, issuers with comparable credit metrics generally receive a lower rating per the standard agencies than their developed market peers.
  • This contributes to the spread premium per credit notch of EM issuers when compared to comparably rated developed market issuers.

EM vs. DM debt: Why the ratings haircut?

EM debt: The cruellest cut

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