Trump’s economic policies raise concerns over impact on yields in emerging market bonds
Date
11/24/2024 3:12:15 AM
(MENAFN) The economic policies announced by US President-elect Donald Trump have raised concerns about their potential impact on yields in emerging market bonds. With expectations of a stronger dollar, local currency yields in these markets could face significant pressure. A stronger dollar under Trump’s administration is anticipated to diminish emerging market bond yields, leading to further outflows from a sector already affected by rising interest rates in advanced economies.
Investors are increasingly worried that a stronger dollar, along with US tariffs, could put downward pressure on emerging market currencies. As demand for exports from these markets declines, it may wipe out dollar-based returns for investors. This shift could have severe consequences, particularly for countries that rely on external investment in their bond markets.
In recent weeks, global markets have been dominated by "Trump deals," driven by expectations that his policies, including tax cuts and tariffs, would spur inflation and push both the dollar and Treasury yields higher. These moves are seen as contributing to the challenges facing emerging markets, where currencies and bond prices are increasingly vulnerable to changes in US monetary and trade policies.
Data from JPMorgan shows that investors withdrew nearly USD5 billion from funds investing in emerging market bonds, both in dollars and local currencies, in November. This brings the total outflows this year to over USD20 billion, following significant withdrawals of USD31 billion in 2023 and USD90 billion in 2022. Analysts suggest that this trend could have a lasting negative impact on emerging market economies, especially in countries like Mexico, Brazil, and Indonesia, which have benefited from greater credit reliability and less reliance on US dollar-denominated debt in recent decades.
MENAFN24112024000045015839ID1108919325
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.