BlackRock and JPMorgan are pulling back from US bonds and building positions in emerging-market debt, betting that higher real yields there will keep paying off. The wager rests on a weaker dollar, and both a possible Federal Reserve rate hike and geopolitical tension could turn it around.
BlackRock and JPMorgan are rotating out of US fixed income and into emerging-market debt, chasing higher real yields as developed-market bonds wobble. 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 pointed to similarly high real yields in EM local debt as a continuing opportunity.
The numbers behind the rotation
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, published in July 2026, shifted EM local-currency debt to a small overweight position while moving equities and hard-currency debt to neutral.
Michele has been specific about the mechanics behind the trade. In December 2025, he said EM local debt was offering real yields significantly elevated compared with developed-market alternatives, and he favors local currencies over hard currencies on the expectation that the dollar's strength keeps eroding.
Risks that could reverse the trade
JPMorgan chief executive Jamie Dimon warned in April 2026 of a potentially looming "bond crisis", tying it to persistent US deficits and escalating geopolitical concerns. A September 2026 selloff in EM bonds coincided with roughly 70% odds of a Federal Reserve rate hike being priced into markets, which would strengthen the dollar and make the carry trade less attractive.
Tensions stemming from the Iran conflict have also injected volatility into global markets, the kind of uncertainty that can send capital fleeing from emerging economies back to US Treasuries. The dollar's trajectory remains the single biggest variable: Rieder's thesis depends explicitly on continued dollar weakness.
Why two asset managers are aligned
US credit spreads sat near 30-year lows in February 2026, meaning investors receive less compensation for holding corporate debt. Michele has also pointed to systematic under-allocation as a tailwind, since institutional portfolios remain underweight EM debt relative to the opportunity set. BlackRock manages over $10 trillion in assets, and with JPMorgan among the largest global asset managers, their positioning tends to draw smaller allocators along with it.
Source: Crypto Briefing
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