The strength of developing market currencies could impact emerging markets debt. While yields in developed economies remain depressed, with some even trading with negative yields, emerging market bonds have quickly gained traction as one of the few areas left with attractive yields.
Emerging currencies have strengthened on improving commodity prices, notably the rebound in crude oil prices, as many developing economies are major exporters of raw materials. Consequently, more investors are looking to emerging market yields, despite the risks associated with the developing economies.
“The end of the week will feature the US and Chinese presidents having their first face-to-face meeting. Trump has toned down the bellicose rhetoric in which he accused China of “raping” America, threatened to abandon the one-China policy, and promised to cite China as a currency manipulator “on day one,” according to the BBH note seen in Barron’s. “China seems to have made a few concessions. It has banned coal imports from North Korea, and the US had long wanted China to do more to rein in its ally. It has also granted Trump a little more than three dozen trademarks.”
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