With credit spreads tight and investors searching for attractive sources of income and diversification, frontier markets are coming to the fore. In particular, local currency debt is emerging as an undervalued and overlooked opportunity, supported by improving policy credibility, attractive real yields and the potential to generate returns that are less correlated with developed market fixed income.

Thomas Christiansen (pictured), head of emerging markets fixed income at Swiss private bank , for instance, are also positive about emerging markets. “Emerging markets remain a preferred allocation, as resilient growth, improved policy credibility, and healthier external balances support the asset class. Selectivity remains essential, but attractive income and diversification benefits strengthen the case for exposure,” Messi said in a note this week. He highlighted that they continue to demonstrate resilience, and AI-driven debt issuance is creating opportunities rather than being a broad threat to credit spreads.

“For investors seeking more diversified income approaches, select exposure to emerging market and high yield credit can be considered, alongside equity income and yield-generating structured investment strategies,” Haefele added.