As the U.S. bond interest rates have continued to climb recently, prompting an outflow of funds into emerging markets in the second half of last year, of which Russia, South Africa and Indonesia should be less affected because of the government’s high cash level, but Peru, Brazil and other countries with poor finances, I am afraid it is difficult to revive the economic recovery in the post-Epidemic era.
Bloomberg reports that emerging markets boomed in the second half of last year, driven by a weaker dollar and record-breaking stimulus measures, but U.S. bond yield rates have risen in recent months, causing emerging market bonds to lose color. Many developing countries are now also caught in a dilemma: in order to revive the economy hit by the epidemic as borrowing costs begin to rise, they must raise enough money to be able to expand spending.
According to the Bloomberg Barclays index, emerging market countries in a good financial position, the public debt issued by the more resistant to this year’s global wave of bond selling. If calculated in U.S. dollars, South Africa’s bond prices have fallen 1.5%, Indonesia’s debt fell about 5%, Russia’s debt fell 7%; but the higher demand for debt issued by Peru and Brazil’s bonds, have fallen more than 8%.
To add insult to injury, the overall emerging markets are expected to be in the end of 2021, the equivalent of 3 trillion dollars worth of bonds will mature.
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