EM Credit Weekly: Balancing hawkish Fed with supportive geopolitics

Research evidence excerpt

EM Credit Weekly: Balancing hawkish Fed with supportive geopolitics

EM Credit Weekly

18 June 2026 Citi Research

Figure 3. Citi oil price forecasts – bull/bear/base case and Figure 4. Number of cuts/hikes prices in by YE2026

future

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Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25 Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26

© 2026 Citigroup Inc. No redistribution without Citigroup’s written permission. © 2026 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, Bloomberg Source: Citi Research

At the same time, the Fed has delivered a hawkish signal through its latest

projections, despite attempting to downplay the message. The shift toward

tighter policy expectations (and a clear focus on inflation vs growth), combined

with reduced forward guidance and continued balance sheet uncertainty, suggests

that global liquidity will remain constrained. Policy is already restrictive, albeit

unevenly transmitted, and this environment typically limits upside in spread

performance while increasing sensitivity to idiosyncratic risks (US Economics -

FOMC – Hawkish shift as 9 of 18 want to hike). Taken together, the macro mix

argues for a more selective and defensive stance in EM credit, with emphasis on

resilience to both lower commodity prices and tighter global financial conditions.

LatAm Sovereign Update: Idiosyncratic Stories

Back in the Driver’s Seat

Latin American sovereign spreads are now trading through pre-Iran conflict

levels, highlighting how quickly investors shifted their focus back to country-

specific fundamentals rather than geopolitical risk. Colombia has been the clear