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5 minutes to read by  BlueBay Fixed Income Team Jul 10, 2026

June Review:

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  • Geopolitics dominated the narrative in June as the US-Iran conflict moved toward resolution, with Trump announcing on 14 June that the interim deal was “now complete.” This drove Brent crude sharply lower to end the month at $72.92/bbl, close to pre-conflict levels. Equity markets were more muted, however, with the S&P 500 posting a small loss of -1.1% as the AI theme consolidated, even as that same theme had driven the index to a quarterly return of +15.2%, alongside a +68% surge in the KOSPI and +88% gain in the Philadelphia Semiconductor Index. Central banks turned notably more hawkish against a backdrop of resilient economic data. At the first FOMC meeting under new chair Kevin Warsh, half of officials indicated a preference for a rate hike in 2026, with market pricing shifting from 7bps of cuts to 38bps of hikes by year-end. The ECB delivered its first rate hike since 2023, taking the deposit rate 25bps higher to 2.25%, while the Bank of Japan also hiked 25bps to 1%. Against this backdrop, gold fell -12% over the month to $4,008/oz and the dollar index rose +2.2%, as the Fed re-established its inflation-fighting credentials.

  • EM credit markets delivered positive returns, with corporates returning +0.34% and sovereigns, +0.72%, predominantly driven by higher yielding assets. Spreads tightened by 2bps for corporates and 3bps for sovereigns. Within corporates, the Transport, Real Estate and Oil & Gas sectors outperformed with Consumer and Industrials detracting over the period. In sovereigns, Latin America and Europe contributed the most and the Middle East slightly detracted. Local markets also delivered positive returns over the month, with the index returning +0.20% for the month. This was primarily driven by positive performance in Rates, which returned +1.30%, whereas FX was negative over the period returning -1.09% respectively. At the country level, Colombia, Turkey and Peru contributed to returns over the period. However, Chile, Malaysia and Serbia detracted from performance.

Looking to Emerging Market News:

  • Middle East tensions eased following a ceasefire between the US and Iran, bringing an end to the sharp escalation that had driven oil prices higher earlier in the month. As fears of disruption to energy supplies and shipping through the Strait of Hormuz subsided, crude prices retraced much of their gains, providing relief for global markets. The move was supportive for oil-importing emerging markets such as Turkey, India and the Philippines, where lower energy costs should help ease inflationary pressures and reduce external financing strains. Conversely, the decline in oil prices moderated the near-term fiscal and external benefits previously expected for commodity exporters including Saudi Arabia, Nigeria and Angola, highlighting the sensitivity of many emerging markets to geopolitical developments in the region.

  • Peru’s presidential runoff went in favour of Keiko Fujimori, which was viewed by markets as a constructive outcome given expectations of a more orthodox and pro-business policy agenda. Investors reacted positively to the prospect of stronger fiscal discipline, improved policy predictability and support for private investment. However, the political backdrop remains challenging, with questions around governability, social tensions and Fujimori’s ability to build a stable congressional coalition likely to remain key risks.

  • In Colombia, Abelardo de la Espriella won a narrow runoff victory, marking a shift towards more market-friendly policy after the Petro administration. His agenda is expected to focus on security, fiscal discipline and reviving the hydrocarbons sector, which investors viewed positively. However, Colombia’s fiscal position remains fragile and the president-elect’s ability to build a functional congressional coalition and stabilise deteriorating public-debt dynamics remains uncertain. There were severe earthquakes in Venezuela towards the end of the month which prompted a coordinated international response including US financial support and IMF engagement, though oil production and mining operations remained largely unaffected, mitigating some of the immediate economic damage.

  • There were severe earthquakes in Venezuela towards the end of the month which prompted a coordinated international response including US financial support and IMF engagement, though oil production and mining operations remained largely unaffected, mitigating some of the immediate economic damage.

Outlook

Geopolitical tensions flared again following reciprocal strikes around the Strait of Hormuz, though neither side appears willing to pursue any meaningful re-escalation and markets, oil prices included, are looking through the noise and treating the episode as largely resolved. Brent crude has retreated to pre-war levels (low $70/bbl), even though fully restoring traffic through the Strait of Hormuz will take weeks or months. Given that many countries still need to rebuild their strategic oil reserves, we expect oil prices to stabilise around current levels rather than fall meaningfully from here.

For EM fixed income, the month has seen strong inflows, despite some equity outflows. We view this as evidence that investors continue to buy into the EM fixed income story: diversification benefits, convergence towards developed markets and cheaper valuations. In hard currency, a low default rate combined with yields that remain historically elevated (despite tight spreads) means the forward-looking return profile still looks attractive. In local markets, credible central banks remain a key anchor in dampening volatility, which has helped draw investors back into the asset class. We continue to identify plenty of idiosyncratic opportunities across both hard and local currency markets, keeping us constructive on EM fixed income over the coming weeks and months.

chart-em-desk-note-2

1Source: JPMorgan EMBI Global Diversified Index, JPMorgan GBI-EM Global Diversified Index, JPMorgan CEMBI Diversified Index, ICE BofA Diversified Local EM Non-Sovereign Index JPMorgan EMBI Global Diversified Investment Grade Index, JPMorgan EMBI Global Diversified High Yield Index.

chart-em-desk-note

1Source: JPMorgan EMBI Global Diversified Index, JPMorgan GBI-EM Global Diversified Index, JPMorgan CEMBI Diversified Index, ICE BofA Diversified Local EM Non-Sovereign Index JPMorgan EMBI Global Diversified Investment Grade Index, JPMorgan EMBI Global Diversified High Yield Index.

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.

Additional information about RBC GAM may be found at www.rbcgam.com.

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.

RBC GAM reserves the right at any time and without notice to change, amend or cease publication of this information.

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.

Some of the statements contained in this material may be considered forward-looking statements which provide current expectations or forecasts of future results or events. Forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties. Do not place undue reliance on these statements because actual results or events may differ materially from those described in such forward-looking statements as a result of various factors. Before making any investment decisions, we encourage you to consider all relevant factors carefully.

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© RBC Global Asset Management Inc., 2026
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