2 weeks ago
Traders Get Pickier in Emerging-Market Inflation-Linked Debt
Inflation-linked bonds are special bonds that pay investors more money when prices go up.
This year, these bonds from developing countries have made investors a lot of money.
They earned 11.1% in 2026 so far.
That is much better than most other kinds of bonds.
Now investors are being picky about which ones to buy.
Some countries, like Brazil and Mexico, have already had big gains.
Investors are now looking at Chile, Poland and Argentina.
Prices are rising faster than expected in many countries, and Turkey's central bank even admitted it missed its price target.
A weather pattern called El Niño could push food prices back up.
Experts disagree about which bonds are still a good deal.
An index of emerging-market inflation-linked local-currency government debt returned 11.1% in 2026 through Friday, following its best year in over a decade.
After strong returns in Brazil and Mexico, traders are turning to inflation-linked bonds in Chile, Poland and Argentina.
Inflation accelerated more than expected in Argentina, India, South Africa and Romania, while remaining sticky in Brazil and Colombia.
Turkey's central bank revised its year-end inflation projection to 28% from 26%, acknowledging a 'partial failure' to meet CPI targets.
Brazil and Mexico account for more than half of index-eligible emerging-market inflation-linked debt, which has surged above $800 billion.
- Who
- Emerging-market investors and fund managers at firms including BlackRock, Vontobel, Aberdeen, Aegon Asset Management, JPMorgan Chase & Co. and Societe Generale, along with central banks such as Turkey's.
- What
- Investors are becoming more selective in emerging-market inflation-linked government debt after a year of strong returns.
- Where
- Emerging markets, especially Latin America (Brazil, Mexico, Chile, Colombia, Argentina), plus Poland, South Africa and Turkey.
- When
- In 2026 through Friday of the week the article was published.
- Why
- Persistent inflation worries, currency swings, higher energy costs and divergent central-bank policy paths are prompting investors to adjust their bets.
Bullish on linkers
Cautious on linkers
Overall outlook for inflation-linked debt
Bullish on linkers
BlackRock's Benjamin Souza says inflation-linked bonds are increasingly interesting given uncertainty around inflation and central-bank policy, and Societe Generale's Brendan McKenna notes linkers get a tailwind from currency strength, especially in Latin America.
Cautious on linkers
Vontobel's Thierry Larose says linkers had a great run but are now generally less attractive, while Aberdeen's Kieran Curtis says linkers are expensive in most countries, with Poland the possible exception.
Where to find value
Bullish on linkers
Some investors favor linkers in Argentina, Chile, Colombia and Poland, citing attractive valuations, liquidity and a more balanced risk-reward profile.
Cautious on linkers
In Brazil and Mexico, some investors prefer fixed-rate bonds, betting implied inflation expectations are excessive and that nominal yields at mid-double digits look appealing.
Key facts
- Asset class size
- $886 billion
- 2026 return of EM inflation-linked debt index
- 11.1%
- Broader EM local debt index return
- 1.6%
- Bloomberg Global Aggregate Bond Index return
- -0.2%
- Brazil and Mexico share of index-eligible EM linkers
- More than half (per Bloomberg Intelligence)
- Turkey's revised year-end inflation projection
- 28% (up from 26%)
- Best-performing EM currencies in 2026
- Colombian peso, Brazilian real, Mexican peso
- JPMorgan recommendation
- Long-term investors add Poland and South Africa
Quotes
Benjamin Souza
BlackRock’s head of strategy for Latin America
“"Inflation‑linked bonds are increasingly interesting in the current environment, particularly given the uncertainty surrounding inflation and the path of central bank policy globally."”
livemint.com
“"Linkers are a bit expensive in most countries at the moment, perhaps with the exception of Poland."”
livemint.com
Thierry Larose
Portfolio manager at Vontobel focusing on Argentine debt
“"Linkers had a great run so far this year but are now generally less attractive." "However, we will be prompt to reassess our views and stance if and when El Niño is to affect food and electricity prices more than currently anticipated."”
livemint.com
Sources
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