After a quiet start to 2025, the iBoxx LSF USD African Sovereigns experienced a sharp drop during the initial market reaction to the new U.S. tariff policies, but recovered quickly once markets started to calm down. In the second half of the year, the index consistently outperformed U.S. Treasuries, with the gap widening further following the U.S. Federal Reserve’s interest rate cuts in September 2025. Over the whole year, the index reported an 18.68% gain, outperforming U.S. Treasuries by close to 12.50%.
Emerging market sovereign USD bonds delivered robust performance in 2025, with the overall index gaining more than 12% for the year, primarily driven by the high yield segment (see Exhibit 2). The high yield segment of the market was up by more than 15%, while the iBoxx LSF USD African Sovereigns posted the highest performance among all the indices, with a gain of 18.67% in 2025. Over both the three‑ and five‑year periods, Latin American high yield sovereign issuers (as represented by the iBoxx USD Emerging Markets Broad Latin America Sovereigns High Yield) outperformed all of the other indices. Specifically, the index outperformed the iBoxx LSF USD African Sovereigns by 4.10% and 1.38% over the respective periods. Over the three-year period, the iBoxx USD Emerging Markets Broad Sovereign High Yield delivered only a marginally higher performance than the iBoxx LSF USD African Sovereigns. In contrast, across the five-year period, the iBoxx LSF USD African Sovereigns demonstrated stronger performance, exceeding the iBoxx USD Emerging Markets Broad Sovereign High Yield by 0.76%.
