Emerging Markets Debt Monitor

Emerging markets debt rallied back quite strongly during the second quarter, recouping much of the pullback that ensued during Q1. Fundamentals remained on solid footing in broad terms with robust economic activity, a continued rally across the commodity complex, a wideopen new-issue market, multilateral institutional support (e.g. the IMF), and a relatively supportive macro backdrop with loose fiscal and monetary policy throughout much of the developed world and the extreme volatility in the U.S. Treasury market during Q1 subsiding. While the market rallied strongly for much of the period, the more-hawkish-than-expected tone from the U.S. Federal Reserve at its June meeting did put a damper on the macro environment during the last couple weeks with a bout of broad dollar strength particularly weighing on EM currencies. This is a development that bears watching moving forward and likely has implications for the asset class.