Emerging markets safe despite bond vigilantes

Federal Reserve building“Bond vigilantes” are likely to cause volatility in Treasury yields despite the efforts of the US Federal Reserve to prepare the markets for tapering – but emerging markets probably won't be hit so hard this time around. The claims come from Jan Dehn, head of research, and Gustavo Medeiros, portfolio manager, both from emerging market specialist Ashmore. “The Fed’s power to influence the bond market has become very asymmetric,” they write. “The Fed is (almost) the only game in town when it comes to buying US Treasuries. In Q2, for example, the Fed was the only net buyer in the market. Therefore, rates can easily go up if the Fed stops buying.” Even if the Fed tries a new strategy such as lowering its formal threshold for hiking interest rates to 6% unemployment, this will only be a verbal commitment, and bond investors may well choose to disregard it. However, Dehn and Medeiros say emerging markets are better placed to weather the storm than they were in the summer, when emerging market bonds fell on fears that tapering was imminent. “In brief, EM asset prices went down over the summer, but fundamentals improved,” says the research note. ©2013 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.