Monetary Matters with Jack Farley How the Iran War Reshapes the Sovereign Debt Landscape | Sovereign Debt Expert Lupin Rahman
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Mar 27, 2026 Lupin Rahman, former head of sovereign credit at PIMCO and author, offers a short take on sovereign debt and emerging market dynamics. She walks through why sovereigns behave differently from corporates. She explores FX and hard‑currency risks, how geopolitics in the Middle East reshapes flows, and which EM issuers and sectors may win or lose under commodity and duration shocks.
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Favor Local Debt In Investment Grade EMs
- Prefer local-currency exposure in IG EMs where domestic markets are deep; expect 70%+ of financing domestically in many IG names.
- Rahman notes local pension funds, insurers, and deep onshore markets supply most IG financing.
Most EM Bonds Are Owned Onshore
- The bulk of EM marketable debt is held onshore, contrary to the common belief that advanced-economy investors dominate.
- Rahman cites $12–14 trillion domestic bonds across ~80 countries with mainly onshore investor bases.
EM Strength Due To Better Policy and Inflows
- EM outperformance since 2020 reflects stronger fiscal consolidation and institutional reforms versus advanced economies.
- Rahman links proactive pandemic policy, inflation anchoring, and inflows (including diversification away from Treasuries) to last year's EM rally.
