Bonds
Dawn of Interest-Rate Pivots Threatens EM’s Standout Trade
- Latin American local-currency debt has soared so far this year
- But uncertainty is mounting amid Fed, BOJ policy paths ahead
Rio de Janeiro, Brazil.
Photographer: Dado Galdieri/BloombergThis article is for subscribers only.
One of the year’s top fixed-income trades is facing a critical juncture in Latin America as bond investors attempt to time pivots in US and local interest rates.
Central banks in the region have wooed money managers with their early and aggressive monetary tightening cycles — establishing a level of inflation-fighting credibility that’s fueled a 25% rally in domestic bonds. Now, as local policymakers start to pivot ahead of the Federal Reserve, the bet comes with a new undertone of risk.