US Treasury (10 Yr Generic) Watchlist
What to Expect of EM Rates When Expecting US Rates to Stay Volatile?
FX & Rates
166 Views, 21 Jan 2022 00:24
- The risk of US yields continuing to rise is high especially with inflation not having peaked yet, the Fed potentially reducing its balance sheet, and real rates still negative.
- The high volatility in US rates does not bode well for EM rates due to their high correlation even though EM local debt is overall cheap based on most metrics.
- Until the volatility in US rates subsides, it is best to focus on cross-country and curve trades in EM, with my preference for curve steepening trades in several countries.