Key topics  EM fixed income will remain challenged into H2 by the tightening in global financial conditions in order to tame inflation.

 We stay UW EM local bonds and EM FX, and MW EM sovereigns and corporates where we revise spread forecasts higher.

Macro developments  EM growth has withstood a barrage of shocks since the start of this year. In 2H, much hinges on the tug-of-war between a resilient private sector and inflation.

 Facing high inflation and already well-advanced hiking cycles, EM central banks must decide when enough is enough.

 Despite a worsening in twin deficits relative to last year, the risk of a late-cycle crisis for the larger EM countries is mitigated by excess savings positions; for more vulnerable frontier markets those risks are higher.