‘No Margin for Error’ Sparks Rush for Hedges in Emerging Bonds

Strategists and investors are turning to hedging and relative-value trades as a rally in emerging-market bonds looks increasingly disconnected from the looming impact of the ongoing conflict in the Middle East.

JPMorgan Chase & Co. is telling clients to seek protection against potential losses in risk assets through a credit-default swap index, while Fidelity International and London-based hedge fund Frontier Road Limited are cutting or limiting their exposure to developing debt. At PPM America, managers are taking a more selective approach, targeting countries that may perform well regardless of how the war in Iran evolves.