Junk bonds of companies in emerging markets are the most expensive in seven years relative to the U.S., underscoring concerns by policy makers from Mexico to the Philippines who say the threat of asset bubbles is increasing.
Growth is so slow in emerging markets that central bankers are tolerating faster inflation to stimulate their economies, driving investors to debt linked to consumer prices at the fastest pace in two years.
For all of the killings of elected officials at war with the criminal drug gangs, there is no stopping the Mexican investment boom thanks to the 16-year-old trade agreement that is buoying Latin America’s second-largest economy.
Brazilian policy makers are poised to raise borrowing costs at the fastest pace since President Luiz Inacio Lula da Silva took office in 2003 after central bank chief Henrique Meirelles pledged “vigorous action” on inflation, the futures market shows. The biggest two-day surge in six months on yields of the overnight interest rate futures contract due in July reflects expectations that Meirelles will raise the benchmark Selic rate 2.25 percentage points to 11 percent by the June policy meeting, according to data compiled by Bloomberg. The yield gap between the July 2010 and January 2021 futures shrank to the narrowest since August today on bets higher borrowing costs now will make it possible to avoid more increases in years ahead.