Emerging markets outperform developed peers amid global bond sell-off

by@FT

Summary

Emerging markets are faring better than developed markets amid a global bond market sell-off, with investors observing that many emerging economies are less susceptible to capital outflows due to higher U.S. interest rates. This resilience is bolstered by stronger fiscal positions and tighter monetary policies in various emerging countries, which have led to improved macroeconomic fundamentals. Conversely, developed markets are experiencing significant pressure from fiscal concerns, persistent inflation risks, and rising long-term yields, contributing to their bond-market struggles.

Analysis

Market context: Emerging-market bonds have recently outperformed developed-market debt during the global sell-off, supported by stronger fiscal positions, contained inflation, and tighter monetary policy in several countries. Investor rationale: Higher real interest rates and improved macroeconomic fundamentals in many emerging economies are providing a buffer against capital outflows when U.S. yields rise. Developed-market pressure: Fiscal concerns, persistent inflation risks, and rising long-term yields in major economies are driving much of the current bond-market weakness.

Categories

macropolitics

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