Emerging markets: fundamentals holding, selection critical
Michel Aubenas, BlackRock’s head of emerging market debt, enters Q4 with a constructive but selective view. The firm notes that emerging markets debt yields are close to 7% – based on J.P. Morgan EMBI Global Diversified and GBI-EM Global Diversified indices as of October 2, 2026 – but with spreads in the bottom half of the last five years, the case for broad compression as a return driver has diminished.
The positive backdrop is real: 2026 marks a fourth consecutive year of net positive sovereign credit ratings upgrades in emerging markets, led by lower-rated countries, according to BlackRock analysis of Bloomberg, S&P, Fitch, and Moody’s data as of September 18, 2026. Policymakers across many markets have maintained restrictive monetary policy, strengthened external resilience, and consolidated fiscal accounts. Recent elections in Hungary, Peru, Colombia, and Brazil have also brought market-friendly candidates to power, the report notes.
BlackRock’s forward-looking stance favors income over duration, high yield over investment grade in credit, and BB-rated corporates as a buffer against global rate volatility. In currencies, the firm retains a constructive medium-term view on emerging market foreign exchange but favors carry and relative value – citing Colombia at 4% and Brazil at 7.5% – over broad directional exposure.
Asia: a wider income opportunity set
Navin Saigal, BlackRock’s head of global fixed income for Asia Pacific, frames the Asian fixed income landscape as one in which the question for investors has shifted from “How do I earn a high income?” to “Which risk do I want to underwrite?”
The region offers investors approximately 7% yields through distinctly different avenues: currency-hedged, long-dated Japanese government bonds; shorter-duration public high yield where credit risk prevails; and bespoke credit where returns reflect contractual cash flows and structural complexity.
