At Any Rate
EM Fixed Income: US Election First Reactions
Nov 8, 2024
After the recent U.S. election, market reactions in emerging markets reveal a mix of currency and credit spread shifts. There's an emphasis on caution regarding future policy uncertainties and their potential impact on U.S. rates and the dollar. The discussion also highlights how tariffs may create vulnerabilities in global markets, particularly for emerging economies, underscoring the need for awareness of possible adverse scenarios from trade wars. Insightful analysis provides a clear picture of current market dynamics.
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Quick takeaways
- Emerging markets experienced volatility post-U.S. elections, marked by a quick sell-off and subsequent recovery in key currencies like the Mexican peso.
- Investor confidence is reflected in tightened EM sovereign and corporate spreads, despite the looming uncertainties around policy changes and trade dynamics.
Deep dives
Market Reactions to the U.S. Election
Emerging markets have displayed mixed reactions following the U.S. election results, showing both significant volatility and general resilience. Initially, there was a sell-off in emerging market currencies like the Mexican peso, which saw a drop of approximately 3.5 percent before recovering with a rally. However, the overall movement has been somewhat muted compared to previous election cycles, leading to a state where many market metrics, including EM rates, appear relatively unchanged from pre-election levels. Despite these fluctuations, EM sovereign and corporate spreads have both tightened, indicating a degree of confidence among investors despite the uncertain backdrop.
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