Emerging-market investors shift to higher-quality dollar bonds

Emerging-market investors are shifting from junk debt to higher-quality dollar bonds due to a decline in global risk appetite. This marks a change from a years-long trend of strong performance in junk debt from developing nations. Investment-grade bonds in emerging markets have risen 2.5% in 2025, outperforming high-yield bonds for the first time in five years. Higher-quality junk bonds rated BB have also shown gains, with countries like Panama and Colombia leading. Concerns over global economic stability and U.S. policy shifts have prompted this move towards safer assets. Lower-rated junk bonds are now facing challenges, as investors seek more reliable returns amid increasing market volatility.