Global EM Fixed Income Mid-Year Outlook: Ride the Volatility, Keep the Carry

Research evidence excerpt

Global EM Fixed Income Mid-Year Outlook: Ride the Volatility, Keep the Carry

Global Insight

May 15, 2026 07:14 PM GMT

Morgan Stanley & Co. International plc+MGlobal EM Fixed Income Mid-Year Outlook James K Lord

Strategist

Ride the Volatility, Keep the James.Lord@morganstanley.comMorgan Stanley & Co. LLC +44 20 7677-3254

Simon Waever

StrategistCarry Simon.Waever@morganstanley.com +1 212 296-8101

Ioana Zamfir

Strong EM fundamentals led to resilient performance amidst a Strategist

Ioana.Zamfir@morganstanley.com +1 212 761-4012

roller coaster of oil market and inflation uncertainty. Spreads Emma C Cerda

and FX have performed well. From here a weak USD helps, but Strategist

Emma.Cerda@morganstanley.com +1 212 761-2344

limited duration gains and already tight spreads don't, with carry Sofia Palacios

now doing the heavy lifting to year-end. StrategistSofia.Palacios@morganstanley.com +1 212 761-0428

Morgan Stanley & Co. International plc+

Neville Z Mandimika

FX & EM Strategy: We came into 2026 with a bullish view on EM local markets. The Strategist

Neville.Mandimika@morganstanley.com +44 20 7425-2509

oil shock and likely EM CB hikes in coming months have thrown the outlook for

Arnav Gupta

duration off course, but we still see EM currency gains in the next 3-6m. Yields Strategist

could come lower later in the year but we stay patient before recommending Arnav.Gupta@morganstanley.com +44 20 7677-0382

receivers. The asset class has delivered just 1% TR YTD but we pencil in ~7% returns Morgan Stanley Asia Limited+

for local markets over the remaining 7 ½ months of the year with carry doing much Gek Teng Khoo

of the heavy lifting, alongside a weaker USD and stable UST yields. Latam and Gek.Teng.Khoo@morganstanley.com +852 3963-0303

CEEMEA look set to continue outperforming AXJ.