Is there resilience in EM debt markets?

clock • 2 min read

Trade disputes, dollar strength and extensive currency depreciation in Argentina and Turkey (both with large current account deficits) have weighed on emerging market (EM) sentiment in recent months.

In this environment, concerns have resurfaced regarding the external balances of emerging market countries, and potential vulnerabilities in repaying dollar-pay debt.   While EMs feature select country-specific risks, we do not see systemic issues. Across the largest EM economies, current account deficits have narrowed since the 2013 'taper tantrum'. The average current account deficit in the 'fragile five' ex-Turkey (Brazil, India, Indonesia and South Africa) has moved from 4.0% GDP in Q4 2012 to 1.9% GDP in Q1 2018. 'US dollar has crossed the Rubicon': Fund managers remain bullis...

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