U.S. 10-year Treasury yield this week had risen to 1.33%, nearly a year since the high level. Experts warned that the debt interest rate pumped up fear of impact on emerging markets, funds may flow out of the Asian debt market, triggering a chain effect.
As Inflation is expected to heat up, U.S. debt rates continue to rise, leading to the U.S. Treasury bonds and emerging market debt interest rate differential narrowing, weakening the latter’s attractiveness.
ANZ Asian research director Khoon Goh said, if the 10-year U.S. bond yield breakthrough 1.5%, and began to rise toward 2% to become cautious, because it is likely to lead to capital out of the Asian bond market.
U.S. debt rates rose, mainly because the market began to reflect the economic impact of the $1.9 trillion stimulus package. Sid Mathur, head of emerging markets research at BNP Paribas Asia Pacific, said the move could also lead to a revaluation of emerging market bonds.
However, not all emerging market bonds are facing a crisis, Aberdeen Standard Investments emerging market bond investment director Mark Baker pointed out that compared to other fixed-income assets, the local currency settlement of emerging market bonds to better weather the storm, not only in response to the exchange rate and appear relatively cheap, and attractive debt interest.
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