Emerging‑market bonds’ outperformance over Treasuries is attracting growing numbers of investors looking to capitalize on the compelling carry‑trade returns in the sector.

Since the end of March, as markets started to recover from the selloff triggered by the Iran war, Bloomberg’s index for EM local‑currency sovereign debt has returned 3.7%, while a comparable Treasuries gauge has posted a slight loss. Over the same period, the average yield on emerging bonds has fallen by 26 basis points, compared with a 30 basis‑point increase for US government debt.

The decline in EM bond yields, coupled with higher local‑currency payouts, has made carry trades more attractive. Investors are increasingly allocating capital to emerging‑market sovereignMacro debt, hoping to capture the spread between growing bond yields and the more stagnant Treasury levels.

Market participants note that the trend is likely to continue as global risk sentiment nws improves and emerging‑market economies resume growth, reinforcing the carry‑trade narrative.