EM Fixed Income: Battle tested, but shields still up

Emerging markets demonstrate resilience against rising U.S. yields and energy price volatility, with local currency assets outperforming despite recent external pressures. While rapid U.S. rate repricing poses short-term risks, synchronized global cyclical growth supports the broader EM outlook. European gas prices are increasing, yet improved LNG infrastructure mitigates the potential for the extreme price spikes observed in 2022. Credit markets remain range-bound, where recession risk—rather than technical pressure—represents the primary threat to spreads. Meanwhile, Brazilian assets are entering a critical phase as the upcoming election approaches, with market participants closely monitoring fiscal policy signals. Overall, while positioning remains moderate, the interplay between central bank policy, balance of payments, and idiosyncratic political events continues to drive market performance.