BlackRock: Double-Digit Returns for Emerging Market Bonds by 2026

Michel Aubenas, Head of Emerging Market Debt at BlackRock, recently expressed his optimistic outlook for the asset class. He believes that emerging market bonds are poised for another bountiful year of returns in the context of a weaker dollar improving financing conditions.

In an interview with Bloomberg, Aubenas shared specific profit expectations. He forecasts high single-digit or even low double-digit returns for emerging market local currency debt. For hard currency debt denominated in US dollars or euros, Aubenas believes the returns will also be in the mid to high single-digit range. The yield of emerging market bonds remains highly attractive for now.

Aubenas pointed out that the Federal Reserve's policy of keeping interest rates unchanged has eliminated the risk of rate hikes. This environment means that the Federal Reserve is no longer a potential source of rising interest rates, thereby providing support for emerging market assets.

The performance of the emerging market bond market has been relatively muted this year due to market turbulence caused by the war in Iran. The market performed exceptionally strong the year before, with hard currency debt achieving an 11% return last year. The Bloomberg index shows that the return on emerging market hard currency debt this year is 1.3%, while the local currency bond return is 1.2%. In comparison, the return for local currency bonds for the entire year of 2025 was as high as 9%.

Despite the mild start to the year's return performance, BlackRock believes that current yields are still at historically high levels. This provides an excellent opportunity for investors seeking high yields to enter the market. In his analysis, Aubenas warns investors that future excess returns will be more reliant on diversified strategies. He believes that returns are unlikely to be driven by a single investment theme or trading opportunity.