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Rates Divergence Leads to Ever Bigger Stress in EM Asia’s Bonds

  • Real policy rates have turned negative amid surging inflation
  • Rout in Treasuries will weigh on region’s bonds: Credit Suisse
Shoppers buy vegetables at a wholesale market in New Delhi.

Shoppers buy vegetables at a wholesale market in New Delhi.

Photographer: Anindito Mukherjee/Bloomberg
Updated on

Bonds in Southeast Asia are at risk of a selloff as the Federal Reserve’s hawkish posture pushes central banks in the region to hike rates aggressively.

Benchmark rates in the region are close to record lows, and policy makers will be forced to act due to the double whammy from US rate hikes and surging domestic price pressures. Investor skepticism on the patient policy stance adopted by local central banks is deepening as inflationary pressures refuse to ebb across the globe.