Investors dump local currency EMD on US rate hike fears

Outflows of $727m this week

Investors pulled out of local currency emerging market bonds at the fastest rate since the beginning of the year, as worries over a US interest rate hike escalate.

Local currency emerging market debt saw outflows of $727m during the week ending 19 October, according to EPFR, amid growing concerns over another interest rate increase by the Federal Reserve and worries over slowing growth in China. What factors could derail the EMD rally? Emerging market debt has seen strong interest from investors this year, as the Fed has maintained a dovish stance on interest rates, while yields on other fixed income instruments dropped to all-time lows. However, some managers have been warning the asset class is overbought, while the possibility of an intere...