Report: This year, the performance of emerging market debt may be better than that of developed market bonds.

Eurizon's senior fund manager Emanuele Del Monte stated in a report that in the case of a weak US dollar and stable or decreasing US treasury yields, emerging market debt may continue to outperform developed market bonds in 2026. This senior fund manager stated that local currency debt has the greatest upside potential, combining high real yields and undervalued currencies, such as the Brazilian real, Mexican peso, and South African rand. He said that in some markets, ongoing inflation control provides room for central banks to moderately cut interest rates. External debt is more driven by arbitrage trading, with selective value in high-yield sovereign bonds, where the spreads of these bonds still price default risk too high. Del Monte said investment highlights include local currency markets in Latin America and interest rates in South Africa, as well as external debt in some frontier markets such as Argentina and Ecuador.