Toning down our optimism about EM assets & currencies

We have become more pessimistic about the outlook for emerging market (EM) assets and currencies as we now expect the 10-year US Treasury yield to rise further over the next two years.
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EM Markets Chart Book

Contagion from Turkey’s crisis likely to remain limited

Spillovers to other emerging markets from Turkey’s ongoing currency crisis have been limited so far and we think this will remain the case even if Turkey’s financial markets remain under pressure.

24 November 2021

DM Markets Chart Book

We think US inflation compensation will rise further

US 10-year inflation compensation has risen by another 20bp or so over the past month and we think it will increase further as inflation in the US proves more persistent than most expect. This is one of the reasons why we forecast the yields of long-dated US Treasuries to rise over the next two years.

19 November 2021

Global Markets Update

We now expect E-Z “peripheral” spreads to widen a bit

We now think that, rather than remaining broadly stable, the spreads of euro-zone “peripheral” bonds will widen somewhat over the next two years as the ECB gradually normalises monetary policy. That said, we still expect spreads to remain low by historical standards.

17 November 2021

More from Global Markets Team

DM Markets Chart Book

We still expect higher yields & equity rotation in the US

The hawkish surprise delivered by the Fed at its latest meeting and the subsequent market reaction have not changed our view that the 10-year US Treasury yield will end the year higher and that the “rotation trade” in equity markets will resume before long.

24 June 2021

DM Markets Chart Book

We forecast higher yields, a stronger $ & gains in equities

We now think that 10-year government bond yields in most developed markets (DMs) will rise further. However, we think that they will climb more rapidly in the US than elsewhere in the developed world. As such, we have revised up our forecast for the US dollar, and expect it to strengthen somewhat between now and end-2022. Nonetheless, we are sticking to our view that DM equities, including in the US, will generally make further ground as economies re-open and corporate earnings rebound.

31 March 2021

EM Markets Chart Book

We don’t think we are in for another “taper tantrum”

We still expect emerging market (EM) “risky” assets and currencies to make further gains this year, despite growing concerns about another “taper tantrum”.

23 February 2021
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