Emerging Market Local Currency bonds continued to perform well through the second quarter. From our perspective, returns were buoyed by improving sentiment across most emerging markets with solid fundamentals attracting investor inflows into the asset class. The quarter saw lower yields as well as stronger emerging market currencies. A few notable political events in countries like Brazil led to a rise in volatility in some countries; however, these seem unlikely to alter the overall improving trend.
The most widely followed emerging market local currency benchmark, the JP Morgan GBI-EM Global Diversified Index (the "Index") returned 3.62% for the second quarter of 2017. The yield on the Index fell 40 basis points (bps) to 6.15% over the period, while the yield on 5yr maturity U.S. Treasury bonds were relatively flat, falling 3 basis point to 1.89%.
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