The Treasury market may be just one spark away from exploding and sending 10-year yields all the way up to 2%, suggesting that the rout of 2021 may not yet be over and raising the chances that other assets like emerging-market bonds might also be living on borrowed time.
Analysts are now putting the target on Treasury yields around half a percentage point higher than current levels following the rapid, reflation-fueled selloff that took the market by storm last week. Should that happen, it’s not just developed markets that will be left reeling. Developing-market bonds are increasingly at risk as investor concern grows about stretched valuations and the chances of a policy misstep by the Federal Reserve.
