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14 Jan 2015
Inflation and monetary policy trends in EM - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that while low DM bond yields have captured the attention of the markets, they note that EM bond yields have also fallen significantly.
Key Quotes:
"US 10-year yields near 1.80% are new cycle lows, while most EM 10-year local currency yields are at the low end of recent (3-month) trading ranges".
"Mexico is near 5.6%, for example, while India is near 7.75%. South Africa and Turkey too are right at the low end of recent ranges. Notable exceptions are Brazil (at 12.1%, just below the middle of its 3-month trading range) and the Philippines (at 4.3%, near the top of that range)".
"The same holds true for EM dollar-denominated debt (see report: Broad Trends in EM Bonds). Here, the notable exceptions are Russia and Venezuela".
"What’s driving this rally? Pretty much the same factors driving the DM rally: lower commodity prices coupled with slow global growth, which are feeding into global deflationary impulses. Most central banks are grappling with inflation that is below target".
"As a result, we think most EM central banks will swing dovish in 2015".
Key Quotes:
"US 10-year yields near 1.80% are new cycle lows, while most EM 10-year local currency yields are at the low end of recent (3-month) trading ranges".
"Mexico is near 5.6%, for example, while India is near 7.75%. South Africa and Turkey too are right at the low end of recent ranges. Notable exceptions are Brazil (at 12.1%, just below the middle of its 3-month trading range) and the Philippines (at 4.3%, near the top of that range)".
"The same holds true for EM dollar-denominated debt (see report: Broad Trends in EM Bonds). Here, the notable exceptions are Russia and Venezuela".
"What’s driving this rally? Pretty much the same factors driving the DM rally: lower commodity prices coupled with slow global growth, which are feeding into global deflationary impulses. Most central banks are grappling with inflation that is below target".
"As a result, we think most EM central banks will swing dovish in 2015".