Some tentative signs of stabilisation

Yields of dollar-denominated emerging market government bonds have surged since late May, reflecting increases in both underlying US Treasury yields and credit spreads. But while Treasury yields have remained high in recent weeks, credit spreads have fallen a fair way from their peaks, suggesting the market is beginning to show some tentative signs of stabilising. This is not entirely surprising as emerging market dollar-denominated bonds underperformed similarly-rated US corporate bonds significantly during the recent sell-off.