Assessing the risks to EMs from higher US real yields

We don’t expect the recent rise in US bond yields to turn into a rerun of the 2013 Taper Tantrum. But even if US real yields continued to grind higher, we think that EM assets and currencies would be better placed to cope than in 2013.
Franziska Palmas Markets Economist
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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 Franziska Palmas

Global Markets Update

Earnings expectations and the outlook for DM equities

We think that there is more scope for earnings expectations to improve outside, than inside, the US. In both cases, though, we are not anticipating upward revisions on the scale seen over the past year.

2 July 2021

Capital Daily

Assessing the risks to our positive view of E-Z peripheral bonds

While the risk that political events cause an increase in euro-zone “peripheral spreads” has arguably diminished recently, a withdrawal of ECB support has become more of a concern. On balance though, we still expect peripheral spreads will remain very low in the coming years.

28 June 2021

Capital Daily

BoE policy may ultimately lead to a steeper UK yield curve

The yield of 10-year Gilts fell after the Bank of England kept its policy settings and forward guidance unchanged at its meeting today. However, we suspect that if the Bank continues to look through strong growth and activity data, investors may start to anticipate higher inflation further ahead in time, causing long-term Gilt yields to rise and the yield curve to steepen.

24 June 2021
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