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Surging U.S. Yields Loom Over Emerging Markets Beholden to Fed

  • Implied volatility posted its biggest weekly gain this year
  • Inflation data in Brazil, Mexico to offer clues on policy path
Brazil Markets Fall On Report Of Ex-President Temer's Arrest
Photographer: Patricia Monteiro/Bloomberg
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Rising U.S. Treasury yields are starting to concentrate minds in the world of emerging markets.

Developing-nation local-currency bonds had their worst week since September in the five days through Friday, while dollar debt slipped by the most since January as surging inflation expectations fueled a rout in Treasuries. The selloff in the world’s largest bond market also sent implied volatility for currencies and stocks to the biggest weekly increase this year. Even so, exchange-traded fund investors looked past the increase in U.S. yields last week and continued to pour money into emerging markets.