Under the impact of tariffs, emerging market dollar bonds are engulfed in gloom, with junk sovereign bonds plunging over 10%.

All emerging markets have not been immune to the impact of the trade war, with sovereign and corporate bonds denominated in US dollars seeing losses so far this month. According to data compiled by Bloomberg, as of April 9, seven junk-rated sovereign bonds from countries including Maldives, Sri Lanka, Gabon, and Zambia have fallen by more than 10%, with average decline of 2.9% for emerging market sovereign USD bonds. Corporate bonds have also performed poorly, with all bonds from various countries seeing a decline, averaging a 2.6% drop, nearly wiping out all gains made in 2025. Despite a surge in the stock market after US President Trump announced a partial suspension of tariffs on Wednesday, emerging market sovereign USD bonds still closed down by 0.6%, indicating that more confidence from investors is needed for recovery - the market focus has now shifted to assessing the impact of tariff increases on inflation and the potential long-term damage to trade chains. Yields on emerging market sovereign USD bonds have risen to 7.38%, hitting a new high since August last year, 80 basis points higher than the five-year average. Although being the primary target of US tariffs, Chinese sovereign USD bonds only saw a slight decrease of 0.5%, making them one of the best-performing bonds this month. Ukrainian corporate bonds showed the best performance so far this year, with steel manufacturer Metinvest BV and poultry giant MHP SE maintaining an average increase of 7% despite the declines this month.