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4 minutes to read by  A.Kettle, BlueBay Fixed Income Team Feb 5, 2026

Senior Portfolio Manager Anthony Kettle’s weekly BlueBay Emerging Market Debt commentary offers readers a concise yet wide-ranging macro overview. Kettle covers markets large and small, providing insight on how financial, political, and economic developments in one region affect markets elsewhere. Here is his latest insight.

Summary

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Global equities produced small gains overall this week, however, the relative calm at index level masked increasing divergence and sector rotation under the surface as artificial intelligence (AI) continues to disrupt older technologies. This resulted in the S&P 500 gaining +0.3% and the Euro Stoxx 50 holding flat while Emerging Markets (EM) equities gained +1.8%. The US rates curve bull steepened with 5-year yields down 4 basis points (bps) and 30-year yields up 5bps. 10-year US real yields were 2bps lower to end the week at +1.90%.

In EM credit markets, spreads were 3bps tighter for corporates and flat for sovereigns, while total returns were up +0.2% and +0.1%, respectively. In the corporate space, the real estate and industrials sectors outperformed, while the consumer and banks sectors underperformed. In the sovereign space the notable performers were Ukraine, Gabon, and Argentina. The biggest underperformers were Senegal, Zambia, and El Salvador.

In the EM local markets, returns were up +0.8% with foreign exchange (FX) contributing +0.4% and rates +0.3%. In the FX space, outperformers were the Malaysian ringgit, Hungarian forint, and Polish zloty, whereas underperformers were the Uruguayan peso, Thai baht, and Colombian peso. In the rates space, Brazil and South Africa outperformed, whereas Colombia, Thailand, and Turkey underperformed.

Market highlights

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  • Brazil's central bank confirmed an easing cycle commencing in March, with soft growth and moderating inflation expected to support a 50bps cut at the next meeting, as well as further easing at subsequent meetings. In contrast, Colombia's central bank reinforced credibility with a 100bps rate hike to +10.25%, exceeding market expectations and signalling further tightening ahead. Meanwhile Mexico's central bank is anticipated to maintain rates unchanged at 7%. Across the region, sensitivity to further FX appreciation will likely prove greatest in Brazil and Mexico, presenting key risks to market forecasts.

Market outlook

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Central bank meetings have delivered few surprises recently, yet policy biases are shifting as robust global growth, divergent inflation, and dollar weakness drive a wedge between developed and emerging market impulses. The US Federal Reserve (Fed) has tilted toward a neutral stance amid firm growth and sticky core inflation near 3%, unlikely to support near-term easing despite incoming Fed Chair Kevin Warsh's dovish inclinations. Sub-segments of the market are also bracing for volatility, as evidenced by the dramatic repricing in the software sector. This is following Anthropic's AI tool launch, which has triggered a sharp sectoral rotation, as AI euphoria has turned toward concerns about business model disruption. Precious metals have similarly experienced considerable swings, while ongoing geopolitical tensions add further uncertainty for markets to deal with.

For EM, the shift in investors’ outlooks around the US dollar, driven by US economic policy volatility, is prompting inflows into emerging market FX positions. There is a sense that a virtuous circle is forming where FX strength helps fuel disinflation and allows for emerging market central bank dovishness. Prospects of longer-term US dollar adjustments, combined with improving earnings growth for emerging market economies, are now supporting better normalisation in global emerging market equity allocations. Emerging market credit is also attracting investor interest given attractive relative valuations versus developed market peers, while countries like Ecuador are an example of opportunistic use of the robust market conditions to strengthen liquidity profiles through new issuance, with Argentina likely to follow suit over the coming months. We continue to see the current environment of geopolitical uncertainty and a less certain developed market policy framework as one that will drive investors towards emerging markets as they seek out the diversification benefits that the asset class offers.

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Disclosure
This material is provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM or its affiliated entities listed herein. This material does not constitute an offer or a solicitation to buy or to sell any security, product or service in any jurisdiction; nor is it intended to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon for providing such advice. This material is not available for distribution to investors in jurisdictions where such distribution would be prohibited.

RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc. (RBC GAM Inc.), RBC Global Asset Management (U.S.) Inc. (RBC GAM-US), RBC Global Asset Management (UK) Limited (RBC GAM-UK), and RBC Global Asset Management (Asia) Limited (RBC GAM-Asia), which are separate, but affiliated subsidiaries of RBC.

In Canada, this material is provided by RBC GAM Inc. (including PH&N Institutional), each of which is regulated by each provincial and territorial securities commission with which it is registered. In the United States, this material is provided by RBC GAM-US, a federally registered investment adviser. In Europe this material is provided by RBC GAM-UK, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this material is provided by RBC GAM-Asia, which is registered with the Securities and Futures Commission (SFC) in Hong Kong.

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This material has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate and permissible, be distributed by the above-listed entities in their respective jurisdictions.

Any investment and economic outlook information contained in this material has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions in such information.

Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time. Such opinions are for informational purposes only and are not intended to be investment or financial advice and should not be relied or acted upon for providing such advice. RBC GAM does not undertake any obligation or responsibility to update such opinions.

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Past performance is not indicative of future results. With all investments there is a risk of loss of all or a portion of the amount invested. Where return estimates are shown, these are provided for illustrative purposes only and should not be construed as a prediction of returns; actual returns may be higher or lower than those shown and may vary substantially, especially over shorter time periods. It is not possible to invest directly in an index.

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© RBC Global Asset Management Inc., 2026
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