Emerging market investors shun riskiest bonds as US yields soar
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Dollar debt from countries in the emerging world returned 1.4% over the past year despite the recent turmoil that has sent yields on US Treasuries to the highest in nearly two decades. Even with oil above $100 a barrel and investors bracing for higher-for-longer global interest rates, credit spreads are at their tightest since 2007, raising alarm bells for money managers who say the bonds are bound to sell off.
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“When we have rising government rates, I get concerned on what that does to the level of spread,” said Jeff Grills, the head of EM debt at Aegon. “When I look at where are the great opportunities, they are hard to find.” Grills recently trimmed his exposure to Colombia, while adding debt from higher-rated credits like Indonesia and the Philippines.
