Carmignac Portfolio EM Debt

In the United States, the labor market continues to show strength, with the unemployment rate falling to 4.0%. At the same time, inflation rose to 3.0% year-on-year.

On the political front, Trump has begun to implement his program, starting with an increase in tariffs on Mexico, Canada, China and Europe, which is expected to come into effect in the coming months.

In addition, talks on a ceasefire in Ukraine have begun, with Trump engaging in negotiations with Russia, a first since the start of the war in 2022.

Rates fell in February in developed and emerging countries, particularly in the United States, where the 10-year rate fell by 33 bp thanks to Donald Trump's announcements and leading indicators pointing to a slowdown, while the German 10-year rate decreased more moderately by -5bp.

In this context, emerging local and external debt performed well over the month.

On the currency front, the US dollar continued its lull in February, which began at the start of the year, against a backdrop of moderation in US exceptionalism. This situation benefited the euro and certain emerging currencies.

In a buoyant environment for emerging market debt, the Fund recorded a positive performance, outperforming its ref. indicator.

On the local debt side, we benefited from our positions on Mexican, Indonesian and Hungarian local rates.

Our credit exposure made a positive contribution, mainly due to our exposure to corporates in the financial and energy sectors and our selection of emerging countries in hard currency bonds.

On the other hand, our positions on Argentine debt and the protections we put in place to reduce our exposure to credit markets had a negative impact.

Finally, on the currency front, we benefited from our exposure to certain EM currencies such as the Chilean peso, our selection of Eastern European and Central Asian currencies (Polish zloty, Hungarian forint and Kazakh tenge) as well as our long positions on the Japanese yen.

In a context of resilient global growth and falling inflation, we expect the main central banks of developed and emerging countries to continue their monetary easing. As such, we are maintaining a relatively high level of interest rate sensitivity. However, we lowered it slightly at the end of the period.

On local rates, we favor central banks that are lagging the cycle, such as Brazil, Indonesia and some Eastern European countries (Poland, Hungary) that benefit from high real rates and will be affected by a potential ceasefire in Ukraine. Over the month, we reduced our positions on Indian local rates.

On the emerging external debt front, we are cautious with regard to longer-term investment grade debt, as spreads are already relatively tight. That said, we see opportunities among rated high-yield securities, such as South Africa, Ivory Coast and Colombia.

On credit, we are maintaining our positive, albeit cautious, bias due to high valuations and are keeping a significant level of hedging on the Itraxx Xover to protect the portfolio from the risk of widening spreads.

Finally, with regard to currencies, we now have reduced exposure to the US dollar and we are maintaining limited exposure to emerging market currencies. However, we are diversifying our exposure to the currencies of central banks that are less accommodative, while the Fed continues its monetary normalization with a selection of currencies from Latin America (BRL, MXN, CLP) and countries in Eastern Europe and Central Asia (PLN, KZT).