Higher U.S. Rates Now Threaten Post-Crisis Refuge for Yield
- Emerging market bonds dangle smaller enticements vs Treasuries
- Morgan Stanley turns neutral, citing ‘uncertain backdrop’
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Add emerging-market local bonds to the growing list of securities losing some of their shine on the heels of higher U.S. rates.
After its relative resilience in February’s rout, the asset class -- which has offered shelter in the post-crisis world of low developed-market returns -- has a much-diminished buffer to weather external risks. A fresh outbreak of trade tensions, equity volatility or Treasury selling would leave emerging-market investors acutely vulnerable, according to Morgan Stanley.