EM Local Rates Outlook: H2 2026

Front-end yields in several EM local-currency markets have compressed faster than back-end tenors, leaving curves historically flat. We expect a gradual re-steepening as central banks slow the pace of cuts while fiscal issuance keeps pressure on long-end term premia. Our Nelson-Siegel decomposition shows curvature troughing near current levels across the sample, consistent with a market pricing a smooth, low-volatility glide path rather than a hard landing.