EM Fixed Income: Bye Bye Globalization, Hello Stagflation

A look at the themes impacting Emerging Markets Fixed Income over Q1 2022: Russia’s war in Ukraine, accelerating inflation and de-globalization

Fixed income 18 Apr 2022 2 min read

Federico Kaune

Head of Emerging Markets Fixed Income

Key takeaways

Emerging markets fixed income delivered negative total returns in Q1, mostly reflecting the Russian invasion of Ukraine and higher global inflation.
Global inflation reached levels not seen since the 1970s due to higher food and energy costs.
The Russian invasion of Ukraine exacerbated these shocks as together these two countries account for around 25% of the global trade in grain while Russia produces 11%/21% of the oil /gas in the world.
EM central banks are far more advanced in their tightening cycles vs developed markets as they responded earlier to imported inflation pressures and the depreciation of their currencies in 2021. However, the recent commodity shocks are likely to require further hikes to contain inflation expectations and second round effects.