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EM Fixed Income: Olympic-level Volatility
Aug 9, 2024
Dive into the extreme volatility of Emerging Markets, likened to past crises such as COVID-19. Discover how U.S. recession fears impact currencies and credit spreads, highlighting the risks that set safer economies apart. As unemployment rises, reassess the outlook on recessions and strategize for market volatility. Explore the current emerging market landscape, evaluating the EMFX risk appetite and asset pricing. Plus, uncover how U.S. elections may influence credit strategies and high-yield investments amidst these shifting conditions.
15:06
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Quick takeaways
- The current extreme volatility in EM markets is driven by factors like sharp US rate collapses and rising global credit spreads.
- Despite recession fears, contrasting economic indicators suggest the actual risk of a US recession may be overstated, influencing EM asset strategies.
Deep dives
Recent Volatility in Emerging Markets
Recent market volatility has reached significant levels, comparable only to the peaks seen during the COVID pandemic and the global financial crisis. The benchmark VIX surged to 65, indicating heightened market sentiment and contributing to widespread fluctuations across various asset classes, particularly Emerging Market (EM) assets. Factors such as a sharp collapse in US front-end rates by 70 basis points and notable declines in global equity indices, like the NASDAQ and Nikkei, have exacerbated this situation. Additionally, rising global credit spreads and a breakdown of FX correlations have reflected an overall increase in market anxiety regarding economic stability.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode