Global EM Inflation Linkers Monthly: Breakevens move lower as Middle East conflict de-escalates

Research evidence excerpt

Global EM Inflation Linkers Monthly: Breakevens move lower as Middle East conflict de-escalates

EM Local Markets Strategy

Santiago Olalquiaga (AC) (1-212) 622-2484 J.P. Morgan Securities LLC Gisela Brant (1-212) 834-3947 J.P. Morgan Securities LLC

Michael Harrison (AC) (44-20) 7134-5720 J.P. Morgan Securities plc Ankit Chawla (91-22) 6157-3281) J.P. Morgan India Private Limited

Global EM Inflation Linkers Monthly 30-Jun-26

Breakevens move lower as Middle East conflict de-escalates

• Breakeven inflation moved lower in June. EM nominal bonds rallied 23bp on average this month, outpacing linkers (-2bp). This 10y EM linker real yields, EM nominal bond yields and breakeven inflation

led to average EM breakeven inflation declining 21bp over the past month. Breakevens saw the steepest declines in Türkiye (- Level* (%), 1-month change (bp) and 3-month change (bp)

258bp), Colombia (-73bp) and Poland (-23bp), while only Israel saw a modest uptick (+2bp).

Linkers Nominal bonds Breakeven inflation

Level ∆1m ∆3m Level ∆1m ∆3m Level ∆1m ∆3m• Breakevens move lower as Middle East conflict de-escalates. As markets became optimistic about the prospects of a de-

South Africa 4.13 -7 -50 8.54 -20 -73 4.41 -13 -23escalation in the Middle East conflict, and then as the deal between the US and Iran was announced, oil prices have moved

Türkiye 3.75 9 26 33.09 -249 46 29.34 -258 20substantially lower. This has driven EM breakeven inflation sharply lower, given its tight relationship with oil (see chart of the

Israel 1.92 -11 -27 3.65 -8 -45 1.73 2 -18month). EM ex-TRY breakevens are now back around 3.9%, below pre-conflict levels and well below the 4.4% peak reached in

recent months, suggesting markets are pricing out the inflation risk premium built over the conflict.