Company: EMD
Filing Date: 2025-02-27
Form Type: N-CSR
Source: 0001133228-25-001572
Chunk: 2

Company: WESTERN ASSET EMERGING MARKETS DEBT FUND INC.
Filing Date: 2025-02-27
Form: N-CSR
Chunk 2
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? A. The overall U.S. fixed income market experienced periods of volatility but generated positive results over the twelve months ended December 31, 2024. The market was driven by several factors, including resilient economic growth, moderating inflation globally, shifting global central banks, including U.S. Federal Reserve (Fed), monetary policy and several geopolitical issues. U.S. elections have increased uncertainty surrounding tariffs, global trade and immigration. Short-term U.S. Treasury yields moved modestly higher, as the Fed lowered interest rates in September 2024, the first reduction since 2020. The two-year Treasury yield began the reporting period at 4.23% before reaching a high of 5.04% in April and ending the year at 4.25%. Its low of 3.49% occurred on September 24, 2024. Long-term U.S. Treasury yields generally declined for most of the year given easing inflation and loosening Fed monetary policy. The ten-year Treasury yield touched a low of 3.63% on September 16, 2024. However, longer-term rates reversed course in September 2024 and generally migrated higher into year-end due to election uncertainty and deficit concerns. The yield curve ended up steepening in 2024.

Western Asset Emerging Markets Debt Fund Inc. 2024 Annual Report 1

Fund overview (cont’d)

All told, the Bloomberg U.S. Aggregate Index i returned 1.25% for the twelve months ended December 31, 2024. For comparison purposes, riskier fixed income securities, including high-yield bond and emerging market debt, produced stronger results. Over the fiscal year, the Bloomberg U.S. Credit Index ii and the JPMorgan Emerging Markets Bond Index Global iii returned 2.03% and 5.73%, respectively. Q. How did we respond to these changing market conditions? A. A number of adjustments were made to the Fund’s portfolio during the reporting period. From a country exposure prospective, we added to our overweight to frontier countries given attractive valuations and generally lower duration profiles. In Asia, we reduced our underweight to China during the year. China did not fare well given uncertainty surrounding global trade, growth, tariffs, and the property sector, to name a few factors. We ended the year underweight roughly 5.7% net China exposure versus the Fund benchmark. In European emerging markets, we were underweight in 2024, favoring the dollar versus the euro. Europe has struggled