March 1, 2014
To many, a brutal new year’s sell-off in emerging market assets seemed to entrench a view that the biggest risk to financial stability now sits in the emerging world — including Latin America.
Average yields in JPMorgan’s benchmark index of emerging market local currency government bonds reached 7.2% at the end of January, up from 5.2% in April last year, and compared to yields on 10-year US Treasuries still less than 3%. Within the region, Argentina was forced to a 23% devaluation of the peso in January, its biggest since 2002.
By the end of February, average yields in the emerging markets bond index had returned to below 7%. Currencies rallied: the South African rand and the Turkish li
Latin America’s capital markets are facing a sell-off in emerging markets as indiscriminate as the bull phase it succeeded. But as returns dwindle, asset buyers will have to become more discerning.
By Dominic O’Neill