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Corporate debt: A powerful complement to EM sovereign bonds

Harry Phinney

Hard currency emerging markets (EM) corporate debt has reached a market size and maturity level that makes it a potentially valuable tool for managing risk and pursuing attractive returns when paired with EM sovereign bonds.

 

The market now exceeds $2.5 trillion in outstanding debt. It is broadly diversified across regions, sectors and credit quality. Its strong growth reflects significant structural changes in emerging markets that have supported economic development and resilience, as well as foreign investors’ increasing comfort with the asset class as legal structures have become more stable, transparent and credible.

The rise of EM hard currency corporate bonds

Bar chart shows the growth of the emerging markets hard currency corporate bond market from 2000 through April 2025. During that time the market grew to $2.573 trillion from $144 billion in 2000. The market size peaked in 2021 at $2.678 trillion and subsequently remained above $2.5 trillion.

Source: J.P. Morgan. Data in USD billions as of April 30, 2025. 

 

In our view, key benefits of investing in EM corporate debt include yield pickup relative to developed market issuers and U.S. Treasuries, diversification properties when combined with EM sovereign bonds and a risk-return profile that compares favorably to other fixed income assets including global high yield corporate bonds. 

 

Emerging markets corporate debt is no longer a speculative play on global growth. It is a maturing, increasingly sophisticated asset class that provides global investors with a distinctive mix of yield, diversification and exposure to long-term structural trends in the global economy.

 

In a world of shifting trade dynamics and geopolitical uncertainty, EM corporate debt may serve as a useful component for enhancing portfolio resilience and return potential. For investors with the resources to understand the nuances of each issuer, country and sector, the opportunities could be compelling.

READ THE WHITE PAPER
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Harry Phinney is a fixed income investment director with 19 years of investment industry experience (as of 12/31/24). He holds an MBA in international business from Northeastern University, a master’s degree in applied statistics and financial mathematics from Columbia University and a bachelor’s degree in international political economy from Northeastern University. 

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