Market summary

In the first quarter of 2022, hard-currency emerging market debt1 returned -10.02%, while local-currency emerging market debt2 returned -6.46%.

The worsening Ukraine conflict dominated market attention, particularly following Russia’s full-scale invasion on 24 February. In general, Europe, especially Eastern Europe, is seen as more economically exposed to the conflict than other parts of the world. This is because it relies quite heavily on Russia for its energy imports, as well as significant other trade and financial linkages. The conflict also further increased inflationary pressures globally, contributing to a large increase in government yields, with the 10-year Treasury yield rising to 2.40% by the end of the quarter.


We expect the market to be less dominated by the Ukraine war, allowing for emerging market country bonds to trade more in line with their fundamentals. The sanctions on Russia have caused a further spike in energy prices, despite not targeting energy exports. As a result, inflationary pressures may continue to build over the coming months. While we expect slower global growth in 2022, the trajectory remains above trend, despite rising interest rates in many countries. On monetary policy, some emerging market central banks may overtighten, providing scope for easing towards the end of the year. Omicron continues to lead to fewer severe outcomes than earlier virus strains, allowing for further economic reopening and recovery in international tourism. However, a tough ‘zero-Covid’ approach and ongoing property sector concerns are risks for China’s economic growth, but further monetary easing should help. Additional risks to our outlook include further sustained US treasury yield rises, a strong US dollar and vaccine inefficacy to new Covid-19 variants.

abrdn’s full end-Q1 2022 EMD summary/outlook can be found here


  1.  As measured by the JP Morgan EMBI Global Diversified index
  2. As measured by the JP Morgan GBI-EM Global Diversified index (unhedged in US dollar terms)