Challenges and Solutions to the Cost of Investing in Emerging Markets Local Debt
In this paper, PGIM Fixed Income explains the transaction costs associated with EMLBs and discusses possible solutions to help mitigate and, in some cases, eliminate these costs in order to maximize client portfolio returns.
Capturing the Opportunity of Constraints
Fixed income markets contain a high proportion of investors whose goal of identifying the most attractive relative value is subverted by jurisdictional or self-imposed rules, regulations, and constraints, or is superseded by other non-economic objectives, such as accounting conventions.
U.S. Rates: Low for Long, but Likely Positive
The burgeoning stock of negative-yielding debt across the international markets has investors wondering: will it happen in the U.S. too? Given our long-standing “low for long” thesis for the global bond markets, we expect U.S. rates to fluctuate around current levels and ultimately remain positive given some key distinctions between the U.S. and the growing list of negative-yielding countries. Our assessment starts at the front-end of the curve and whether the Federal Reserve could resort to a nominally negative Fed funds rate. We then look at factors affecting longer-term rates.
Turkey—A Short-Term Reprieve Amidst Persistent Uncertainties
Turkey’s economic crisis erupted one year ago, and PGIM Fixed Income recently returned to the country to gauge the outlook going forward. While Turkey’s large external financing requirements remain its key vulnerability, funding flows should continue normalizing. In this context, it is noteworthy that political uncertainty appears to have “troughed.” Growth apparently remains the overarching priority of economic policy, and any policy missteps risk draining the rather limited (unencumbered) official FX reserves. However, in such a scenario, the authorities could turn to the IMF as a last resort. On balance, we remain cautiously constructive on Turkey’s outlook.