EM has little to fear from rate hikes

摘要

Panic surrounding the impact that future US Treasury rate rises will have on emerging market asset prices is overdone, according to new research. Market participants have been fixated with the effect that higher rates will have on emerging market asset prices since the Fed began tapering its US$85bn a month quantitative easing programme by US$10bn a month in December 2013. Ten-year Treasuries yielded 2.98% on Christmas Day 2013. By last Friday the yield had dropped to 2.41%. Investors are concerned that Treasury rates are due to rise sharply when the Fed stops buying US debt, sending Shockwaves throughout emerging market asset prices and leading to devaluation of currencies, tumbling equity markets and rapidly rising rates. But it seems that investors need not be worried about sudden changes in rates, according to a research paper from Societe Generale called "Are higher US rates bad for EM?"