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Public Fixed Income

EM Debt is Back in Focus

January 2026 – 2 min read

Cem Karacadag, Head of Global Sovereign Debt and Currencies, explores the structural improvements, compelling valuations and shifting risk dynamics that are bringing EM debt to the forefront.

Welcome to this month’s edition of Where Credit is Due—a newsletter from Barings recognizing value across the people and portfolios shaping credit markets today.

To kick off 2026, we’re diving into emerging markets (EM) debt—an asset class that has evolved from a niche allocation into a massive global market. Cem Karacadag, Head of Global Sovereign Debt and Currencies, explores the structural improvements, compelling valuations and shifting risk dynamics that are bringing EM debt to the forefront.

The Speed Read

  • EM debt has matured—Local markets are ~80% investment grade and highly liquid.
  • High real yields in EM local debt + improving fundamentals in hard currency = attractive entry points.
  • Risk perception is shifting: Volatility in EM local debt has been converging toward U.S. investment grade for a decade, dropping below U.S. IG in 2025.
  • Diversification matters: Rising risks in developed markets make EM debt an (even more) valuable tool for portfolio diversification.

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Headshot of Cem Karacadag smiling at the camera.

Cem Karacadag

Head of Global Sovereign Debt & Currencies Group

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