Amid the chaos in bond markets earlier this year, a funny thing
happened to local currency sovereign bonds: cash flowed in.
Between May and September, while the headlines proclaimed
the demise of the emerging markets, and as riots exploded on
the streets of São Paulo, international investors put
$17 billion into Brazilian government bonds denominated in
The effect was less stark in Mexico, but no less
counterintuitive. As analysts downgraded their growth forecasts
for the country, foreign investors bought $2 billion worth of
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