FICC Focus EM Lens: Shifting to Second Derivatives in EM Sovereign Debt
18 snips
Mar 18, 2026 Cem Karacadag, head of global sovereign debt at Barings who focuses on EM debt and portfolio risk, breaks down how the Iran war reshaped EM markets. He contrasts oil exporters and importers. He explores central bank moves, fiscal risks like subsidies and FX defense, and where defensive EM debt and idiosyncratic opportunities may sit.
AI Snips
Chapters
Transcript
Episode notes
Oil Shock Splits Exporters And Importers
- The Iran war is primarily an oil price shock that splits winners (oil exporters) and losers (oil importers).
- Cem Karacadag cautions not to assume current oil prices persist for years and focuses on short-term inflation impact versus long-term fundamentals.
Central Bank Response Determines Long Term Value
- The shock is mainly a short-term inflation event and central bank responses matter most for long-term value.
- Karacadag argues responsible central banks raising short rates and containing inflation can create exploitable value in long-term bonds.
Use FX And Rates As The First Line Of Adjustment
- Do watch countries' adjustment tools: allow currency depreciation and raise short-term rates to restrain domestic demand.
- Karacadag says most EMs have instruments to adjust, so prefer countries that let FX and rates do the work.