Welcome to the 9th annual review of the Emerging Markets (EM) fixed income asset class. Using new data from the Bank of International Settlements and other sources, we establish that the EM bond market has expanded by 12% in Dollar terms in the past twelve months to a size of USD 29.6trn, or 25% of the global fixed income universe as of the end of 2019.

Some 82% of EM bonds are denominated in local currency, unchanged from 2018. The remaining 18% of the asset class consists mainly of Dollar-denominated ‘external debt’, corporate and sovereign. While external debt is a much smaller market, it is more diversified than local debt in terms of index representation. Government bonds constitute 44% of all EM fixed income, down from 45% in 2018 as corporate bonds now make up 56% of the total EM bond market.

Asia dominates the EM fixed income market with 70% of all outstanding bonds, while China alone accounts for 52% of the entire EM bond universe. The EM bond markets are on track to reach USD 45trn by 2025, or 29% of global fixed income.

However, index representation remains inadequate with only 13% of outstanding bonds represented across all benchmark indices. Still, despite poor indices, it is entirely possible to obtain significant diversification within EM fixed income, because the main indices now cover more than 200 individual markets.