CEEMEA & LatAm Strategy Focus: Local vs. Hard: where to invest?

Research evidence excerpt

CEEMEA & LatAm Strategy Focus: Local vs. Hard: where to invest?

Deutsche Bank

Research

Emerging Europe Emerging Markets Date

15 May 2026

CEEMEA & LatAm

Strategy Focus

Local vs. Hard: where to invest?

Christian Wietoska

Exploring synthetic local currency bond exposure in Latam & CEEMEA Strategist

We re-introduce a framework comparing local bond yields to hard currency bonds +44-20-754-52424

across LatAm and CEEMEA. Our approach directly compares USD bonds as

Ankit Jain

synthetic local currency instruments, derived by duration-matched NDF/cross- Research Associate

currency swaps (where transactable) across various tenors. For the historical

analysis, we've constructed constant maturity curves for both hard currency and

local bonds, covering twelve countries (7x CEEMEA & 5x LatAm).

n Synthetic local bond yield = USD bond yield + XCCY rate – US swap rate.

This framework offers guidance for:

n EM issuers: It may be beneficial to issue in local currency and swap to hard

currency, accessing potentially much lower synthetic USD yields.

n Investors: Attractive synthetic local currency yields (from long USD bonds

swapped into local) are a potent tool for expressing views on local markets.

For leveraged accounts, this also uncovers significant relative value

opportunities where liquidity permits.

Key takeaways:

n Across this framework, synthetic local bond yields (from swapping hard

currency USD bonds) have generally been noticeably higher. This is

particularly true for longer tenors, less so for shorter ones, making swapped

USD bonds an attractive yield alternative to local bonds.

n Latest data reveals negative spreads (local yield - synthetic local yield)

across 10Y bonds in all countries except Brazil. Shorter tenors differ: 2Y