Halister News

(Bloomberg) -- EM bonds are an asset class that is “here to stay” because Fed policy suggests there’s unlikely to be any aggressive dollar appreciation, says Peter Kinsella, Commerzbank’s Head of Emerging Market Economic & FX Research.

• “There’s talk of a Dec. rate hike given the hawkish guidance for Dec. but at the margin that doesn’t make a huge difference to the EM story,” Kinsella says in an interview. “Yield pick-up in EM U.S. dollar denominated issuance is going to stay for quite some time.”
• Expects to see more asset managers and hedge funds setting up dedicated EM currency bond funds, both in local and hard currencies
• Market debate has concluded that G10 rates will stay “low forever” instead of “low for longer”
• U.S. yield curve’s steepening in recent weeks isn’t significant and that’s why the broader EM story for investors looking for higher-yielding assets is still relevant
• NOTE: Fed’s dot plot shows officials expect one 25-bps rate increase this year, followed by two next year. In Jan., it was showing four hikes for 2016 followed by another four in 2017