EM USD 10s30s curve flattened mildly, but the overall curve shape remains stable

Overview

This report tracks monthly changes in the emerging market USD bond 10s30s spread curve. The core conclusion is that after broad steepening last month, the curve only flattened mildly this month, and the overall shape remains intact. The overall EM curve, EMBIG, and CEMBI all flattened by only about 1bp month over month, indicating that despite notable U.S. Treasury yield volatility, the average emerging market USD bond curve remained relatively stable.

Core views

The report believes that the magnitude of curve changes this month was relatively small, representing mild bull flattening rather than a structural change. EMBIG Asia flattened by 7bp to 37bp, an important source of EMBIG flattening; within CEMBI, divergence was greater, with Latin America and CEEMEA flattening while Asia steepened modestly. Dispersion at the issuer level also remained significant, with the steepest curves including EGYPT, PEMEX, ELSALV, SOAF, and KSA, and the flattest curves including INDON, SQM, GRUMAB, EXIMBK, and ECOPET.

Analysis framework

The report compares the 10-year and 30-year spread curves of overall EM, EM IG, EMBIG, CEMBI, and their regional subcomponents to observe monthly slope changes, the steepest and flattest curves, and the issuers with the largest steepening and flattening, while also using the relationship with average credit ratings and index constituent adjustments to explain curve shapes.

Methodology notes

• Fixed Income Curve Analysis10s30s Spread Curve

  Uses the spread difference between 30-year and 10-year bonds to measure curve slope.

  Curve steepening usually indicates wider spreads at the long end relative to the short end, while curve flattening indicates narrower spreads at the long end relative to the short end; this report measures monthly changes in bp.

• Index Construction MethodologyPair Selection and Index Aggregation

  Selects comparable 10-year and 30-year bond pairs from eligible bonds in J.P. Morgan's flagship EM indices.

  The rules emphasize replicability, tradability, and structural similarity, and review bond pairs monthly to ensure the selection of liquid and actively outstanding bonds.

• Credit Relative ValueSlope versus Credit Rating Relationship

  Compares the relationship between 10s30s curve slope and average credit rating.

  This framework is used to observe whether there are relative deviations in curve slopes across issuers with different credit quality, thereby helping identify relative value at the regional or issuer level.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• EM USD 10s30s Curve

  Core tracking object of the report

  Strengths

  The overall curve flattened only slightly, showing relatively stable shape.

  Weaknesses

  Stable averages may mask significant issuer-level dispersion.

  Comparison

  Compared with the UST 10s30s curve's 6bp bear flattening, overall EM flattened by only 1bp.

  Risks

  If U.S. rate volatility continues to widen, EM curves may face repricing pressure.

• EMBIG

  Curve indicator for emerging market sovereign and quasi-sovereign USD bonds

  Strengths

  Flattened by only 1bp overall to 71bp, with no obvious damage to curve shape.

  Weaknesses

  The Asia subcomponent flattened by 7bp, showing uneven regional contribution.

  Comparison

  EMBIG Asia slope was 37bp, significantly below the overall EMBIG level of 71bp.

  Risks

  Regional constituent changes and long-short end liquidity differences for individual issuers may affect index readings.

• CEMBI

  Curve indicator for emerging market corporate USD bonds

  Strengths

  Overall flattening was limited, indicating stable average corporate bond curves.

  Weaknesses

  Latin America, CEEMEA, and Asia moved in different directions, showing clear regional divergence.

  Comparison

  CEMBI Asia steepened by 3bp, opposite to the flattening seen in CEMBI Latin America and CEEMEA.

  Risks

  The exit of certain flattest issuers or constituent adjustments may change regional average slopes.

• UST 10s30s Curve

  Global rates curve reference benchmark

  Strengths

  Provides the macro rates backdrop for explaining EM curve changes.

  Weaknesses

  Changes in the UST curve cannot fully explain regional and issuer divergence in EM credit curves.

  Comparison

  The UST curve bear flattened by 6bp month over month, a larger move than the 1bp flattening in the overall EM curve.

  Risks

  If long-end UST volatility intensifies, it could affect EM USD bonds through duration and risk-appetite channels.

Key data

• Overall EM 10s30s Curve68bp, flattened 1bp month over monthBull flattened over the past month, mainly driven by EM IG.
• EM IG 10s30s Curve61bp, flattened 1bp month over monthOne of the main drivers of flattening in the overall EM curve.
• EMBIG 10s30s Curve71bp, flattened 1bp month over monthOverall followed a mild bull-flattening trend.
• EMBIG Asia 10s30s Curve37bp, flattened 7bp month over monthAn important regional source of EMBIG flattening this month.
• UST 10s30s Curve54bp, bear flattened 6bp month over monthUsed as a global rates curve benchmark for comparison.
• U.S. Investment-Grade Credit 10s30s Curve16bp, flattened 2bp month over monthCompared against changes in EM credit curves.
• CEMBI 10s30s Curve56bp, flattened 1bp month over monthFlattened slightly overall, but regional directions were not fully consistent.
• CEMBI Latin America52bp, flattened 1bp month over monthRegional average flattened slightly, while some individual bond pairs saw larger moves but were affected by constituent changes.
• CEMBI CEEMEA60bp, flattened 2bp month over monthThe regional curve also flattened.
• CEMBI Asia61bp, steepened 3bp month over monthMoved in the opposite direction of other CEMBI regions.
• Largest Monthly SteepeningDOMREP 11bp, CDEL 9bp, BABA 7bp, KSA 7bp, PARGUY 7bpLeading steepeners at the issuer level.
• Largest Monthly FlatteningINDON -26bp, GRUMAB -13bp, EGYPT -12bp, SQM -12bp, AITOCU -11bpLeading flatteners at the issuer level.
• Steepest CurvesEGYPT 141bp, PEMEX 121bp, ELSALV 116bp, SOAF 104bp, KSA 90bpIssuers currently with the highest curve slopes.
• Flattest CurvesINDON 9bp, SQM 22bp, GRUMAB 39bp, EXIMBK 39bp, ECOPET 41bpIssuers currently with the lowest curve slopes.

Impact & implications

For investors, this month's data suggest that the EM USD bond 10s30s curve has not undergone sharp directional changes, with moves being more about mild adjustment and regional divergence. Overall curve stability means macro rate volatility has not yet materially disrupted EM curve shapes, but slope changes in individual issuers, regional differences, and month-end constituent adjustments may still affect relative value judgments.

Risks

• U.S. Treasury yield volatility may continue to transmit to long-end pricing in EM USD bonds.
• Monthly adjustments to index constituents and bond pairs may alter the comparability of curve slopes.
• Some issuers have extremely steep or flat curves, which may reflect differences in liquidity, credit fundamentals, or technical factors.
• When regional divergence widens, the overall EM average may understate localized risks.
• The report discloses that the related indices and data rely on public and third-party information, and completeness and accuracy are not guaranteed.

What to watch

• Whether the overall EM, EM IG, EMBIG, and CEMBI 10s30s curves continue to flatten.
• Whether EMBIG Asia continues its relatively stronger flattening trend.
• Whether steepening in CEMBI Asia expands and creates greater divergence versus Latin America and CEEMEA.
• Changes in relative value for issuers with the steepest curves, such as EGYPT, PEMEX, ELSALV, SOAF, and KSA.
• Repricing risk for issuers with the flattest curves, such as INDON, SQM, GRUMAB, EXIMBK, and ECOPET.
• The impact of month-end rebalancing and constituent changes in EGYPT, INDON, and CEMBI on index slopes.