Emerging Markets Strategic Initiatives
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US rates will rise as economy exits recession, mostly driven by
rising inflation expectations
3.50
Emerging Markets and Fed taper: then and now
Ashmore
10-year US rates: nominal, real and break-even inflation (%)
Several factors suggest no need for a repeat of the 2013 'taper
tantrum':
Communication: taper and rate decisions have been divorced
- US real rates likely to remain low even after Fed starts to
tighten policy
EM current accounts in surplus (>1%) vs deficit in 2013 (-
2%), so higher USD funding costs have less of an impact
EM currencies trading close to record lows and 40% below
2013 levels; REER -12% vs 2013
Commodity prices rising, supporting creditworthiness and
economies of exporters; prices were falling in 2013
3.00
2.50
2.00
1.50
1.00
0.50
1.00
0.50
(0.50)
(1.00)
0.00
(1.50)
2012 2013
2014
2015
2016
2017
2018
2019
2020
10yr UST
10yr break-even
10yr real rates (RHS)
EM current account (%, GBI-EM weighted)
2.00
1.50
1.00
0.50
0.00
-0.50
-1.00
-1.50
-2.00
-2.50
2002
2003
2004
2005
2006
2007
Source: JP Morgan, Bloomberg, Ashmore
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
25
2018
2019
2020
1.50View entire presentation