Since the second half of April, the emerging debt market has seen a period of increased volatility. Our conviction concerning emerging market debt in Q3 2018 remains positive. The bear market we have just seen has led to a reconstitution of risk premiums, which are now back at January 2017 levels.
Since the second half of April, the emerging debt market has seen a period of increased volatility. The main trigger of this emerging bond correction, over and above US 10-year interest rates which rose from 2.8% to 3%, is without doubt the US dollar’s appreciation. There are certainly many reasons behind the dollar’s rebound but for the most part, it reflects a de-synchronisation of US growth from the rest of the world. In fact, growth expectations in Europe and the emerging countries have been knocked back by slightly weaker indicators. We know that the consequences of a strong dollar for emerging markets is that currencies depreciate, mainly those of countries managing fragile balances, such as Argentina and Turkey.