LONDON: BNP Paribas Asset Management is shedding any negative yielding emerging market debt and expects to make more adjustments if central banks continue to ease or cut interest rates, the firm's head of emerging market fixed income said on Wednesday.

As the euro zone's 10-year benchmark German government bond yield plunged deeper below zero in recent weeks, it dragged large sections of other euro government and corporate debt with it.

This has led to anomalies that have now seen even high-yield corporate and emerging market bond yields push into negative territory.

Euro-denominated debt issued by countries that are part of the currency union or the wider European Union, and yet still classified as emerging market credits, are in that space.

These include sovereign debt from the likes of euro members Latvia or Lithuania, or EU countries Poland and the Czech Republic.

"We have a very intuitive view that we should not hold any bonds with negative yields in EM, it doesn't make sense, we shouldn't have to do that," said Bryan Carter, head of emerging markets fixed income at BNP Paribas Asset Management.

"We did a scrub and anything that had turned negative, we started selling... and we will continue to do that," he said, adding the firm had started adjusting holdings around three weeks ago.

Euro-based BNP Paribas AM - which manages and advises on 565 billion euros ($633.82 billion) - had also started selling some dollar-denominated emerging market debt issues that now record a negative yield due to hedging costs outstripping yields.

While the affected proportion of the emerging market debt portfolio was not substantial so far, Carter predicted there could be more adjustments ahead.

"It is probably 2-3% of the portfolio so far - but I think the interesting thing is, what if this continues?" he said.

"If everything that the market expects (from the ECB and the US Federal Reserve) now is materialising, we will potentially have to do a lot more rebalancing."

Euro benchmark yields have slipped deeper into the red over the past couple of months as the European Central Bank promised further monetary easing if needed.

That direction was assumed to be cemented by the appointment of International Monetary Fund head Christine Lagarde as new ECB chief from October.