Before the pandemic, emerging markets debt was garnering much interest – offering higher yields and lower correlation to other fixed income asset classes. But while subsequent underperformance has cooled investor sentiment, five structural shifts in the economic environment offer reasons to expect the asset class to heat up again.

Cyclical headwinds turning into tailwinds: When global inflation began to rise in early 2021, emerging market central banks raised interest rates far more aggressively than in developed markets. As inflationary pressures ease, these banks have shifted into reverse, which should support emerging markets growth.