Major asset managers BlackRock and JPMorgan are significantly increasing their exposure to emerging market (EM) debt, a move that is gaining traction amid widespread turmoil in global bond markets. Both firms have been reducing their holdings in US bonds, with BlackRock's CIO Rick Rieder scaling back US investment-grade and high-yield bonds since February 2026, favoring EM valuations and a weakening dollar. JPMorgan Asset Management's Bob Michele has similarly highlighted the attractive real yields in EM local debt.
The strategic shift by these financial giants comes as EM local government bonds delivered over 15% returns in 2025, driven by a weaker dollar and Federal Reserve rate cuts, attracting more than $60 billion in inflows. BlackRock formalized this stance in July 2026, moving to a small overweight position in EM local-currency debt, while keeping equities and hard-currency debt at neutral. JPMorgan's Michele has consistently preferred local currencies over hard currencies, betting on the dollar's strength eroding, and pointed out that EM local debt offered significantly higher real yields compared to developed market alternatives as early as December 2025.
The resilience of EM bonds is evident, with local-currency EM bonds gaining over 3% year-to-date, contrasting with a 0.6% decline for US Treasuries and European government debt. This performance is attributed to tamer inflation in developing economies, averaging around 3.8% (one-third of 2022 levels), and stronger fiscal positions, allowing EM central banks more policy flexibility. Despite warnings from JPMorgan CEO Jamie Dimon in April 2026 about a potential "bond crisis" linked to US deficits, and a September 2026 selloff in EM bonds tied to Federal Reserve rate hike expectations, firms like BlackRock and JPMorgan remain bullish, viewing any dips as opportunities. They also note the systematic under-allocation to EM debt by institutional portfolios, suggesting room for sustained inflows.
Analysts like Chris Kushlis from T. Rowe Price anticipate local rates to remain stable in EM given controlled inflation and growth, favoring local-currency bonds in Brazil, Hungary, Mexico, and South Africa. BlackRock's Michel Aubenas is focusing on markets where central banks might surprise by holding rates steady, such as the Czech Republic. The substantial asset bases of BlackRock (over $10 trillion) and JPMorgan mean their investment decisions often influence smaller allocators, who tend to follow their lead.
