Q3 2023 Emerging Markets - Market Review and Outlook

Q3 2023 Emerging Markets - Market Review and Outlook

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Investment Grade Portfolio Team
SEP 30, 2023

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Market Review

Two months of relatively quiet yet firm market tone came to an abrupt halt at the close of the thirdquarter. Persistent inflation data coupled with the market’s view that recession risk has declined, causedan aggressive bear steepening of the entire treasury curve. The 10-year treasury yield rose 73 basis pointsto 4.57%, hitting the highest level since October 2007. Adding to the pain of the rate shock, EmergingMarkets (EM) felt an additional layer of stress during the quarter as slowing China growth weighed onthe asset class. Despite China home sales seeing a mild recovery following Beijing’s measures to supportgrowth, the lack of material progress continues to dampen overall sentiment. The trickle effect from Chinais felt far and wide. Most recently, the European Central Bank cut its growth forecast, as unease over therestrictive rate environment coupled with the weak economic backdrop from China are affecting evenDeveloped Market (DM) countries.