Emerging-Market Credit Risk Jumps as Hawkish Tilt Hits Bonds
- August selloff spreads from stocks, currencies to debt market
- Rate-cut bets are being pruned from Asia to Eastern Europe
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The emerging-market selloff that started in equities and spread to currencies this month has now gripped bonds, as traders rush to unwind bets they made on expectations for interest-rate cuts.
The average cost to hedge against a default among 20 emerging economies rose Thursday, heading for the biggest monthly increase since June 2022. Asia led a selloff in the dollar-debt and currency markets as China’s economic, financial and property crises weigh on the continent’s growth outlook. Local-currency bond yields spiked the most in Hungary, Romania and Pakistan.