The demand for high-yield bonds in emerging markets has surged, reducing risk premiums to 19-month lows. The yield spread over US treasuries has narrowed to 733 bps, the lowest since April 2022. This trend is driven by investor optimism about a potential dovish shift by the Fed and a general warming up to such bonds since July 2022. High-yield bonds in emerging markets have yielded returns of 9.3% this year, with countries like El Salvador, Pakistan, Sri Lanka, Ukraine, and Argentina among the top performers, linked to their progress in IMF loan deals and bilateral flows.