News Overview

EM Corporate Bond Newsletter

June 2026

Monthly report of the fund management

The market appeared relaxed in May – Trump’s numerous comments on the negotiations with Iran were (once again) taken at face value. Growth in the US is also strong (though one-sided, as it is driven by AI) and is pulling other sectors and countries – which are also necessary for infrastructure expansion – along with it. Risk premiums for EM corporate bonds continued to narrow – absolute performance at index level was just over 0.2%, despite US yields rising by 5–15 basis points (the yield curve flattened).  

Note: Please note that an investment in securities entails risks in addition to the opportunities descibed.

 

Macro Overview

Industrial metals such as copper and zinc continued to rise, benefiting from the expansion of data centres driven by the AI boom. Precious metals, by contrast, tended to trade sideways. Oil and oil derivatives (diesel, chemical prices) fell by 20% on the back of anticipation of a potential deal with Iran. Agricultural prices also fell as input costs (oil, fertilisers) dropped, and favorable weather forecasts were predicted for US farmland.  

The first Fed meeting chaired by Kevin Warsh is eagerly awaited. The market does not expect an interest rate hike. Close attention will be paid to the committee’s wording, particularly as Trump is expected to anticipate an interest rate cut or at least stable key rates going forward. However, the market appears increasingly nervous, as price pressure resulting from the Middle East conflict and the AI boom is becoming noticeable. More investment banks are pushing their rate cut expectations further into the future (e.g. Goldman Sachs) or have revised their forecasts to predict a rate hike for late 2026 / early 2027 (such as BNP Paribas). This is noteworthy, as many market participants are already anticipating a decline in inflationary pressure by that time. 

The US labour market remains robust, though the unemployment rate has recently remained unchanged at 4.3%. For months, employment growth has been concentrated in sectors such as healthcare and the hospitality industry – the latter potentially also influenced by the World Cup. It must therefore be considered that this growth is unlikely to be sustainable.

There is still no solution to the Iran conflict. The US is very keen to reach an agreement – but Israel feels it is still a long way from achieving its goals, and so the first cracks in the partnership are becoming apparent.  

Note: The companies mentioned in this article are selected for illustrative purposes only and do not constitute an investment recommendation.

Emerging Markets Overview

Trump’s visit to China was effectively a non-event; no breakthrough was reported on any key issue. In China, the export engine continues to run strongly, driven by electric mobility, solar energy and ‘conventional’ semiconductor/memory chips. Geopolitical tensions between China and Japan continued to rise after Japan sought closer cooperation with the Philippines in the surrounding waters - including, for example, around Taiwan (see chart 1).

Figure 1: Overlapping claims to the exclusive use of maritime zones harbour potential for conflict

China aims to significantly reduce its dependence on soya beans by 2030. We have previously reported that China also wishes to become more self-sufficient in its agricultural sector with the help of new technologies – this tends to be bad news for farmers in the US, Brazil and Argentina.     

India and Indonesia reported strong growth figures. However, some market participants are skeptical about the figures from Indonesia. The country remains in a crisis of credibility, as the proposed populist reforms are worsening debt and inflation dynamics. 

In Colombia, the outsider from the right of the political spectrum, Abelardo de la Espriella (ADLE), pulled off a surprise victory in the elections, although neither candidate managed to clear the 50% threshold required to win outright. As a result, the president will not be decided until the second round at the end of June. The markets reacted positively, as many now see ADLE as the future president and hope for a move away from left-wing populism and confrontation with the US. 

In Mexico, foreign direct investment (FDI) remains stable, though it is based almost entirely on reinvestment of profits by foreign companies in the country; in other words, the momentum of genuine new investment is subdued ahead of the renegotiation of the USMCA trade agreement. 

In Turkey, a court annulled the election (2023) for the new leader of the leading opposition party to strengthen the ruling party. The markets initially reacted cautiously. The economy is sluggish, inflation has risen again, and the central bank continues to burn through foreign reserves to prop up the currency. The country is currently battling several fronts (growth, inflation, loan defaults), and the measures are producing mixed results. High yields are still holding the structure together, but the country needs (among other things) a very swift end to the Iran conflict.

The ratings or outlooks for several emerging market countries (as well as corporate bonds from these countries), such as South Africa, Nigeria, Moldova and Ghana, were upgraded by global rating agencies in May. This development exemplifies the general improvement in the fundamentals of many emerging market countries which has been accompanied by one of the strongest credit rating improvements in the last 20 years (see Chart 2). 

Chart 2: Strong fundamentals reflect the improvement in credit ratings

Mexico’s rating, by contrast, was downgraded by Moody’s from Baa2 to Baa3, and S&P set the outlook to negative. The ratings of Mexican corporate bonds were either confirmed or, in the case of those with a better credit rating than the government, downgraded by one notch (KOF: from A3 to Baa1). Corporate bonds thus demonstrated greater resilience, even when generating their revenue on the local market, as in the case of Liverpool (retail sector).

Overview of EM Companies

Vedanta from India and Pampa from Argentina also benefited in May from upgrades to their credit ratings. According to news agencies, Vedanta is working on refinancing its bonds (coupons between 9-12%), as the company could currently issue bonds on the market at significantly lower costs. Prio from Brazil (oil) reported positive figures and will significantly accelerate debt reduction this year. The company is one of our overweight positions in the sector and offers yields of around 7% for a BB rating. 

Mexican banks such as Banorte and BBVA came under pressure in May following a post on X by a small law firm claiming that a major Mexican bank was due to be sanctioned by the US Treasury Department. Although this was immediately denied by several parties, the losses previously incurred on the bonds could not be fully offset.  

In Chile, an employee of Banco Santander Chile has been arrested (along with 19 other individuals) who, according to the charges, is alleged to have been laundering money for a mafia organisation for years. The share price did not react – however, bond spreads widened by 5 basis points (from 55 to 60 bps).

Outlook & Performance

Due to our overweight position in Latin America and our exposure to higher-quality credit ratings, the fund underperformed the market slightly. The coming weeks will reveal how the Fed will influence the markets. 

Note: Investments in securities entail risks in addition to the opportunities described.

Performance opportunities for the funds:

  • Sharply falling prices for cereals and fertilisers could ease global inflationary pressures
  • The US has a strong political will to reach an agreement with Iran

     

Performance risks for the funds:

  • Widening of risk premiums, should there be an abrupt correction in the equity markets (AI bubble as the trigger?) – not least because these remain at very low levels

  • A forecast strong El Niño could generate upward pressure on inflation from an unexpected source 

Overview Performance

ERSTE BOND EM CORPORATE

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1W4B7 = Distributing share (A)
AT0000A1W4C5 = Accumulating share (VT)

Retail share classes

AT0000A05HQ5 = Distributing share (A)
AT0000A05HS1 = Accumulating share (VT)

ERSTE BOND EM CORPORATE IG

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1Y9D0 = Distributing share (A)
AT0000A1Y9H1 = Accumulating share (VT)

Retail share classes

AT0000A0WJX7= Distributing share (A)
AT0000A0WJZ2 = Accumulating share (VT)

ERSTE RESPONSIBLE BOND EM CORPORATE

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1PY56 = Distributing share (A)
AT0000A2MKX2 = Accumulating share (VT)

Retail share classes

AT0000A13EF9 = Distributing share (A)
AT0000A13EH5 = Accumulating share (VT)

Overview performance contribution in %

Performance contribution at country level

(relative to the benchmark)

Performance contribution at share level

(relative to the benchmark)

Source: Erste AM; Calculation period May 2026; Contribution to gross excess returns in %, Fund: ERSTE BOND EM CORPORATE, Benchmark: J.P.Morgan CEMBI Broad Diversified Composite Index hedged in EUR; Gross performance data (without deduction of management fee); The companies listed here have been selected as examples and do not constitute an investment recommendation. In the context of active management, the above portfolio positionings may change at any time. 

Fund management

Lead-Manager Péter Varga

...has been a member of the Credits team at Erste Asset Management since 2005. As a Senior Professional Fund Manager, he is responsible for various emerging market corporate bond strategies in the team. He has more than 20 years of investment experience. Before joining the company, Péter Varga was responsible for convertible bond and corporate bond funds and the management of two total return funds at Union Investment (Frankfurt/M.).

Co-Manager Thomas Oposich

...is a senior fund manager in the fixed income division of Erste Asset Management. His current focus is on emerging market corporate bonds. Thomas Oposich has been with the company since 2005 and has many years of experience in bond management. During his career, he has been responsible for a broad range of bond funds consisting of US government, money market and corporate bonds, as well as mortgage-backed securities and euro government bonds.

Co-Manager Agne Loibl

...has been with Erste Asset Management since 2010. As a Senior Fund Manager in the Credits team, she is responsible for emerging market investment grade corporate bonds and the Asian markets. Agne Loibl has extensive experience in the area of credits. She started her career in research at ESMT Customized Solutions in Berlin and moved to Risk Management Securitisations at Erste Bank in 2007. 

Relevant new issues

Overview Erste AM EM corporate strategies

Source: Erste Asset Management; Data as of 31.5.2026

Ratings

For a further analysis, you can view our fund at:

Morning Star Rating:                5 Stars
Morning Star Sust. Globes:     3 Globes
Scope Rating:                           A – 99/100

Risk notes for the mentioned funds

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. All data is sourced from Erste Asset Management GmbH, unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to Art 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the  web site www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the fund prospectus or the Information for Investors pursuant to Art  21 AIFMG and the Key Information Document are available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund. Please note that investments in securities entail risks in addition to the opportunities presented here. The value of shares and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your shares. Persons who are interested in purchasing shares in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to Art 21 AIFMG for restrictions on the sale of fund shares to American or Russian citizens. Misprints and errors excepted.

The public sale of shares in the specified fund in Germany was registered with the Federal Financial Supervisory Authority, Bonn, pursuant to the German Kapitalanlagegesetzbuch (KAGB). The issue and redemption of unit certificates and the execution of payments to unit holders has been transferred to the Fund's custodian bank/depositary, Erste Group Bank AG, Am Belvedere 1, 1100 Vienna, Austria. Redemption requests can be submitted by investors to their custodian bank, which will forward them to the Custodian Bank/Depositary of the Fund for execution via the usual banking channels. All payments to investors are also processed via the usual banking clearing channel with the investor's custodian bank.. In Germany, the issue and return prices of shares are published in electronic form on the web site www.erste-am.com (and also at www.fundinfo.com). Any other information for Shareholders is published in the Bundesanzeiger, Cologne.

Presentations:

It is expressly noted that presentations shall not be construed as providing investment advice or investment recommendations; presentations simply represent the current market opinion. The presentations are not intended as sales instruments and shall therefore not be construed as an offer to buy or sell financial or investment instruments. The investor shall be solely responsible for any and all decisions that he makes on the basis of this presentation.