Trading Fixed Income and FX in Emerging Markets: A Book Worth Reading

Most books about trading fall into one of two buckets. Either they’re pure theory with no real application. Or they’re war stories that sound cool but don’t help you build actual strategies. This book is neither.

Trading Fixed Income and FX in Emerging Markets by Dirk Willer, Ram Bala Chandran, and Kenneth Lam sits in a rare sweet spot. It gives you concrete trading rules for emerging market assets. And then it backs them up with data.

What This Book Is About

The short version: how to trade EM currencies, local rates, and credit. But not in the vague “buy low sell high” sense. The authors lay out specific strategies for EMFX carry, momentum, rates positioning, credit selection, and portfolio construction. Then they test these strategies against historical data to see what actually works.

The longer version: EM fixed income and FX have grown into a massive asset class. Sovereign debt in emerging markets has been rising steadily, even through crises. EMFX trading volumes keep growing. And yet, most investors still treat EM as one big trade. Long EM when risk is on, short EM when risk is off. The authors argue that’s too simple. And they have the numbers to prove it.

One finding that runs through the whole book: EM is roughly 65% global macro and 35% local factors. What happens in the US, with the dollar, with commodity prices, with global risk appetite, those things drive most of EM returns. But the local 35% still matters. And knowing when local factors dominate is where the real edge is.

Who Wrote This

Dirk Willer, Ram Bala Chandran, and Kenneth Lam are (or were) strategists at Citi. Between them, they have over 40 years of experience covering emerging markets. Their team has been ranked #1 in Institutional Investor surveys for EM strategy. These aren’t academics guessing about markets from a distance. They’re people who have been writing trade recommendations for institutional investors for years and tracking their performance.

That matters because the book reads like an extended version of the research notes they’d send to clients. Practical. Specific. Data-driven. No fluff.

Why This Book Matters

Here’s what makes it different from most finance books.

First, they actually backtest their ideas. When they say carry strategies work in EMFX, they show you the data. When they say simple carry has broken down in recent years, they show that too. And then they tell you what modifications improve the results, like adjusting for volatility or combining carry with momentum.

Second, they’re honest about what doesn’t work. A lot of trading books give you the impression that every strategy is a money printer. This one doesn’t. The authors are upfront about the limitations of their models and the periods where strategies failed.

Third, the timing is interesting. The book was written in 2018-2019 and published in March 2020, right before COVID hit. So all their analysis is pre-pandemic. That makes it a useful baseline. You can read their frameworks and then think about how the world changed after.

What This Series Will Cover

The book has 11 chapters, and I’m going to walk through each one. Here’s the roadmap:

1. EMFX and Fixed Income overview - the landscape of EM trading, how big the market is, where returns come from
2. Global Macro factors - why US rates, the dollar, commodities, and risk appetite drive most of EM
3. China’s role - why China became the single most important country for EM assets
4. EMFX trading strategies - carry, momentum, value, and how to combine them
5. Trading around events - IMF packages, elections, capital controls, and other EM-specific risks
6. EM rates - local currency government bonds and how to trade the curve
7. Inflation-linked bonds - a niche but important corner of EM fixed income
8. Corporates - EM corporate bonds and how they differ from sovereigns
9. EM credit - sovereign credit, defaults, distressed debt, and the role of rating agencies
10. ESG in EM - whether ESG scores actually tell you anything useful about EM countries
11. Big data and machine learning - alternative data sources and AI applications in EM

Each post will summarize the key ideas, highlight the most interesting findings, and add my own take on how these frameworks hold up.

Why I’m Writing This

I read this book and kept wanting to talk about it with someone. The problem is, not many people have read it. It’s a niche book about a niche asset class. But the ideas in it are genuinely useful. Not just for EM traders, but for anyone who thinks about macro, currencies, or fixed income.

So this series is my way of making the book’s ideas more accessible. If you’re curious about how professional EM strategists think about markets, this is a good place to start. And if you’ve already read the book, maybe you’ll find a different perspective on some of the chapters.

Let’s get into it.

Book Details:

• Title: Trading Fixed Income and FX in Emerging Markets
• Authors: Dirk Willer, Ram Bala Chandran, Kenneth Lam
• Publisher: Wiley
• Year: 2020
• ISBN: 978-1-119-59905-0

Next: EMFX and Fixed Income - Where the Opportunities Lie