Regime change in Venezuela, reform in the broader Latin America region, and a federal mandate aiming to lower mortgage rates all bode well for insurance firms and offer income opportunities, according to a report from T. Rowe Price.
Change in Latin America
The U.S. government’s January capture and deposal of Venezuela President Nicolás Maduro, along with positive outlooks for Argentina and for Mexico’s state-owned oil and gas company, removed several “albatross” risks from emerging markets, according to the report.
The asset manager suggested this could provide an opportunity for insurers to benefit from investments in emerging market hard‑currency debt, while maintaining a focus on high‑quality corporate bonds from Latin American countries where political and policy reforms are developing.
“While EM spreads are tighter than a year ago, they still offer a meaningful pickup over developed‑market [investment-grade]” debt, the report stated. “Our emerging markets debt team views the improvement in fundamentals as more secular than cyclical, making current yields attractive for long‑horizon portfolios.”
Fed Interference
Risk markets have shrugged off political interference at the Federal Reserve by U.S. President Donald Trump’s administration, according to the report, which noted that U.S. equities are higher and credit spreads are tighter. The firm stated that insurance companies do not need to rush to lock their money into long-term bonds with the current yield levels across fixed income.
“The preference is to use EM and high‑quality securitized credit selectively to secure portfolio income, while keeping interest‑rate sensitivity close to existing liability profiles rather than adding large amounts of long‑end exposure,” the report stated.
T. Rowe suggested that the Trump administration’s order—aimed at lowering mortgage rates—for Fannie Mae and Freddie Mac to buy $200 billion of mortgage-backed securities could be an “opportune time” to reallocate mortgage-backed securities’ holdings.
Growth Resilient, but Inflation Higher
The U.S. economy “remains resilient,” aided by large investments in technology and artificial intelligence firms, according to the report, which also stated that despite pressure on the Fed, the firm expects no interest rate cuts in the first half of 2026. T. Rowe analysts also wrote that the company expects the Fed to base its interest rate decisions on economic data, such as inflation and employment figures, rather than any specific set plan.
“Core [Consumer Price Index] and [Personal Consumption Expenditures Price Index] have been running around 3% year‑over‑year, and the team expects inflation to firm somewhat over the next two quarters before easing in the second half of 2026,” the report stated, adding that the labor market has remained in an “uneasy equilibrium of low hiring, low firing, and a still‑low unemployment rate.”
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Tags: agency mortgage-backed securities, Emerging Markets, investing insurance assets, T. Rowe Price