EM Credit Weekly: Tensions in an anchored market

Research evidence excerpt

EM Credit Weekly: Tensions in an anchored market

EM Credit Weekly

09 July 2026 Citi Research

Tensions in an anchored market

Markets are slightly recalibrating amid the oil-driven risk-off this week. With US-

Iran tensions returning to the limelight, volatility has picked up again with a

notable 8-9% spike in Brent price since the beginning of the week, reminding us

that the geopolitical risk premium will keep affecting sentiment in the summer.

That said, the bias still remains to fade the downside: our commodities team base

case is a swift return to negotiations over the next 1-2 weeks.

In EM Credit, spreads have widened slightly after reaching new tights in mid-June,

and we are now hovering around 100bp in IG and 330bp in HY. Supply has picked

up as well, with several large sovereign issuances across our space, with YTD

supply exceeding USD250bn in sovereigns YTD vs USD220bn in 2025. We remain

relatively constructive on the asset class with OWs in selective HYs as valuations

remain tight but well anchored at this juncture.

Figure 1. US rates vs EM Spreads Figure 2. EM Spreads vs VIX

% Index (bps)

5.00 300 35 450

4.50 350

4.00 20

3.50 100

Jan-25 Apr-25 Jul-25 Oct-25 Jan-26 Apr-26 Jul-26 10 150

Feb-22 Oct-22 Jun-23 Feb-24 Oct-24 Jun-25 Feb-26

US10y EM Spreads (RHS)

VIX 20D MA EM Spreads (RHS)

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

Source: Citi Research Source: Citi Research

Figure 3. Oil vs US rates Figure 4. EM Sovereign issuance (USD bn)

% USD, bn YTD 2026 YTD 2025 yoy change, % rhs

5.00 120 300 80%

4.50 251 67.4% 70%

100 250 4.00

217 60%

3.50 80

200 50%

3.00

60 40% 2.50

150 25.7%

2.00 40 30%

6.6%

1.50

20% 20 100 85 88 77 1.00 15.7% 61

0.50