EM credit trading vs US credit

I’m currently an analyst in US credit trading on the high grade side and have been given an opportunity to move into EM credit as a junior trader This peaks me interest as I’ve always found EM to be an interesting area and wanted to gain a more macro skillset. Though I’ve heard that recently that in the last 2-3yrs the asset class has struggled a lot (outflows, em countries shifting towards local ccy debt). I’m not sure how much this matters but it feels like the budget for EM credit is much smaller than DM credit. Wanted to ask this forum for some advice?

Is this a better job? Should the lower pnl/franchise value be of concern? Generally what is the outlook for this product?


Well, it's a bit like comparing apples and oranges, isn't it? Both US credit trading and EM credit trading have their own unique challenges and opportunities.

In terms of EM credit trading, it's true that the asset class has faced some headwinds in recent years, with outflows and a shift towards local currency debt in some countries. However, this doesn't necessarily mean that the opportunities are drying up. In fact, it could mean that there are more opportunities for those who are able to navigate the complexities of the market.

On the other hand, US credit trading, particularly on the high grade side, can offer a more stable and predictable environment. However, it may not offer the same level of excitement or potential for high returns as EM credit trading.

In terms of the budget, it's not uncommon for EM credit to have a smaller budget than DM credit. This is simply a reflection of the relative size and maturity of the markets. However, this doesn't necessarily mean that there are fewer opportunities in EM credit. In fact, it could mean that there are more opportunities for those who are able to find them.

Ultimately, the decision should be based on your own personal interests and career goals. If you're excited by the prospect of gaining a more macro skillset and navigating the complexities of the EM market, then it could be a great opportunity. However, if you prefer a more stable and predictable environment, then you might be better off sticking with US credit trading.

Remember, there's no right or wrong answer here. It's all about finding the path that's right for you. And who knows? Maybe you'll end up being the one who brings the big bucks to the EM credit trading desk!

Sources: https://www.wallstreetoasis.com/forum/hedge-fund/qa-credit-analyst-at-5b-distressed-shop?customgpt=1, Q&A: Emerging markets investment analyst, Credit - Pod Shop/MM vs. Distressed/Special Sits HF, How concerned should I be?

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You are correct re: outflows but next year should be better given flows tend to follow total returns (not spread returns) so you know lower rates etc. that said the asset class is always structurally unloved so have to get used to that.

Very true about the local issuance but there are still 70-80 countries that issue hard currency debt and new ones that pop up all the time (think Papua New Guinea or Benin- can debate whether they should or not). The hard currency quasi sovereign market (state owned companies) and pure em Corp hard currency markets are big too and could pivot to that so wouldn’t let it be a deterrent.

Not a trader so can’t comment on franchise but would say based on what you indicated the us IG corps trading role is a better job but is such a seat available to you?

what you should be asking is what is a better career? I’d argue it is probably easier to distinguish yourself on the em side (who wants to put up with the circus?) and probably more defensive towards automation- good look finding clean accurate uniform “financial” data for vast swaths of em hy sovereigns to automate trading strategies.

Ultimately though if you get excited about EM and macro take it and if you love thinking about corps/3 financial statements do that as that difference will be the biggest driver 


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