Emerging Markets Get Slammed, Again.
In the last two days the emerging markets have been beat like a drum. I've warned about high risk, emerging and junk bond markets. We have noted the bond market is in its 2nd phase of a pullback, the flight to safety in U.S. Treasuries.
Note that fears of rising interest rates, economic slowdown and corporate margin squeeze are drawing the money into our treasuries. Note the last time the spread got this big, and what ensued. Reflect upon that for a moment, cause and effect, then read on.
Emerging market bonds had their biggest drop in 11 months yesterday as speculation grew that the credit ratings of General Motors Corp. and Ford Motor Co. may be cut to junk, overwhelming the market for high-risk securities.
Emerging market bonds fell for a second day, as investors sold bonds from developing nations and bought U.S. Treasuries.
The yield gap, or spread, investors demand to hold the bonds of emerging market nations instead of U.S. Treasuries widened 21 basis points, or 0.21 percentage point, to 410 basis points. The gap is the widest since October. The spread widened 15 basis points yesterday. The two day spread widening is the biggest since May 9-10, 2004.
Note that fears of rising interest rates, economic slowdown and corporate margin squeeze are drawing the money into our treasuries. Note the last time the spread got this big, and what ensued. Reflect upon that for a moment, cause and effect, then read on.
Emerging market bonds had their biggest drop in 11 months yesterday as speculation grew that the credit ratings of General Motors Corp. and Ford Motor Co. may be cut to junk, overwhelming the market for high-risk securities.
Emerging market bonds fell for a second day, as investors sold bonds from developing nations and bought U.S. Treasuries.
The yield gap, or spread, investors demand to hold the bonds of emerging market nations instead of U.S. Treasuries widened 21 basis points, or 0.21 percentage point, to 410 basis points. The gap is the widest since October. The spread widened 15 basis points yesterday. The two day spread widening is the biggest since May 9-10, 2004.
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