We’ve long argued that EMs were well placed to weather the Fed’s tightening cycle and episodes of rising US Treasury yields – and that has largely been borne out. And, as it happens, the latest sell-off in global bond markets has started to reverse over the past few days. But sovereign bond yields are still higher than they were a month ago. That will add to fiscal pressures in South Africa, parts of Latin America and some frontier markets. Capital flows to EMs have weakened too – with a handful of countries, including Turkey and Romania, looking vulnerable.
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