BlackRock and JPMorgan Shift Capital Toward Emerging Market Debt

BlackRock and JPMorgan are reallocating capital from US bonds into emerging market debt. This shift follows a period of volatility in global fixed-income markets and reflects a strategy to capture higher real yields available in emerging economies.

Rick Rieder, Chief Investment Officer of global fixed-income at BlackRock, began reducing exposure to US investment-grade and high-yield bonds in February 2026. Rieder cited more favorable valuations in emerging markets and a weakening dollar as primary drivers for the move. In July 2026, BlackRock moved emerging market local-currency debt to a small overweight position.

Bob Michele of JPMorgan Asset Management has also favored emerging market local debt, noting that real yields in these assets are significantly higher than those found in developed-market alternatives. Michele has expressed a preference for local currencies over hard currencies, anticipating a continued decline in the strength of the dollar.

The appeal of emerging market debt is supported by performance data from 2025, during which local government bonds returned more than 15%. This performance attracted over $60 billion in inflows into related funds throughout that year. Additionally, Michele noted that institutional portfolios remain underweight in emerging market debt, suggesting potential for further inflows.

The strategy faces risks, including the potential for a bond crisis linked to US deficits and geopolitical tensions, as warned by JPMorgan CEO Jamie Dimon in April 2026. A September 2026 selloff in emerging market bonds occurred alongside market pricing that suggested a 70% probability of a Federal Reserve rate hike. Such an increase in US rates could strengthen the dollar, potentially offsetting the gains from emerging market yields.

The influence of BlackRock and JPMorgan is significant due to the scale of their assets under management. Smaller investors often mirror the positioning of these firms, which can lead to price movements when these large allocators adjust their portfolios.