EM Debt Holds Strong as Dollar Weakens and Global Diversification Deepens

Allianz Global Investors’ EMD Monthly Market Musings (Oct 2025), led by Giulia Pellegrini, reviews why emerging markets continue to deliver solid performance despite geopolitical and issuance headwinds.

• EM sovereign debt is up 11.7% YTD, even with record issuance of $200 billion—largely investment grade names such as Indonesia and Mexico—showing robust investor demand and confidence in fundamentals.

• Despite short-term volatility, the U.S. dollar’s long-term downtrend supports EM local-currency bonds; the EM FX index has gained 16.1% YTD, aided by easier financial conditions and resilient macro policy.

• Central banks are gradually diversifying reserves away from U.S. assets toward currencies like the renminbi, AUD, and gold—evidence of slow but steady de-dollarization that could further boost EM appeal.

Can EMs keep outperforming as the global reserve mix shifts and U.S. policy remains unpredictable? The full report explores positioning, issuance trends, and FX outlook.