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When BlackRock and JPMorgan start agreeing on a trade, the rest of the market tends to pay attention. Both firms have been quietly building positions in emerging market debt while pulling back from US bonds, a shift that looks increasingly prescient as global fixed-income markets continue to churn.
BlackRock’s global fixed-income Chief Investment Officer Rick Rieder began scaling back exposure to US investment-grade and high-yield bonds in February 2026, citing more favorable valuations in emerging markets and a weakening dollar. JPMorgan Asset Management’s Bob Michele has been singing a similar tune, pointing to what he describes as very high real yields in EM local debt as a continuing opportunity.
The numbers behind the rotation
The case for EM debt isn’t abstract. Local emerging market government bonds posted more than 15% returns in 2025, powered by dollar weakness and Federal Reserve rate cuts. That performance drew over $60 billion in inflows into related funds during the year.
BlackRock’s mid-year outlook in July 2026 formalized the thesis: the firm shifted EM local-currency debt to a small overweight position while moving equities and hard-currency debt to neutral.
Michele at JPMorgan has been even more specific about the mechanics. Back in December 2025, he highlighted that EM local debt was offering real yields, meaning the gap between nominal yields and inflation, that were significantly elevated compared to developed-market alternatives. His preference was clear: local currencies over hard currencies, a bet that the dollar’s strength would continue eroding.
The storm clouds they’re watching
JPMorgan CEO Jamie Dimon issued a warning in April 2026 about a potentially looming “bond crisis,” tying it to persistent US deficits and escalating geopolitical concerns. If US rates spike unexpectedly, it would likely drag EM bonds down with them, at least temporarily.
A September 2026 selloff in EM bonds coincided with roughly 70% odds of a Federal Reserve rate hike being priced into markets. Higher US rates strengthen the dollar and make the carry trade less attractive, exactly the opposite of what BlackRock and JPMorgan are positioning for.
Geopolitical risk adds another layer. Tensions stemming from the Iran conflict have injected volatility into global markets, creating the kind of uncertainty that can cause capital to flee from emerging economies back to the perceived safety of US Treasuries.
Jamie Dimon warned in April 2026 of a potentially looming “bond crisis” linked to persistent US deficits and geopolitical concerns.
The dollar’s trajectory remains the single biggest variable. If the greenback resumes strengthening, EM local-currency returns get eaten by forex losses regardless of how attractive the yields look on paper. Rieder’s thesis explicitly depends on continued dollar weakness.
Why two titans are taking the same side
US credit spreads near 30-year lows in February 2026 mean investors are receiving less compensation for the risk of holding corporate debt.
Michele has pointed to systematic under-allocation as another tailwind. Most institutional portfolios remain significantly underweight EM debt relative to the opportunity set, which means there’s room for sustained inflows if the trade continues working. When positioning is light, even modest reallocation can move prices.
BlackRock managing over $10 trillion in assets and JPMorgan being one of the largest asset managers globally means their positioning has market-moving implications. Smaller allocators tend to follow these firms, not because they’re always right, but because being wrong alongside BlackRock is a much easier conversation to have with a board than being wrong alone.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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