Local vs. Hard: Where to invest? June update

Research evidence excerpt

Local vs. Hard: Where to invest? June update

Deutsche Bank

Research

Emerging Europe Emerging Markets Date

18 June 2026

CEEMEA & LatAm

Strategy Focus

Local vs. Hard: Where to invest? June

update

Christian Wietoska

Exploring synthetic local currency bond exposure in Latam & CEEMEA Strategist

In May, we re-introduced a framework to compare local bond yields to hard +44-20-754-52424

currency bond yields across LatAm and CEEMEA. We now provide our monthly

Ankit Jain

update on the results. Research Associate

Our approach directly compares USD bonds as synthetic local currency

instruments, derived by duration-matched NDF/cross-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 12

countries (seven from CEEMEA and five from LatAm). For the initiation report,

please see here: http://research.db.com/research/TinyUrl/W7STW

Key takeaways this month:

n Across this framework, synthetic local bond yields (derived from

swapping hard currency USD bonds) have generally been noticeably

higher, reflected as a negative spread in our charts. This trend is particularly

pronounced for longer tenors, while shorter ones exhibit less of this effect.

Consequently, swapping USD bonds presents an attractive yield

alternative to local bonds.

n However, the latest data reveals a noticeable widening of these spreads

(local yield minus synthetic local yield) over the past month, moving

towards more positive or less negative territory. In essence, local bonds

have recently become relatively more attractive compared to swapped

hard-currency bonds.

n Despite this shift, spreads on 10-year bonds, with the exceptions of Egypt

and Brazil, remain negative.