Emerging market local-currency bonds are experiencing a difficult outlook due to changing investor sentiment caused by concerns about a potential tariff trade war and a strengthening dollar.

This has resulted in a decline of 3.5% in a Bloomberg index that tracks local debt in developing nations since early October, with a year-to-date gain of less than 2%. The decline has been more pronounced following Donald Trump's election victory, as his "America First" policies have raised worries about their impact on emerging markets.

This economic agenda has contributed to higher Treasury yields and a stronger dollar, leading investors to reevaluate their positions on interest-rate cuts.