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STOCKS | Rising U.S. Yields Pressure Emerging Market Assets

11/09 17:25

Emerging market stocks and bonds fell as a global selloff driven by high oil prices weighed on markets awaiting U.S. inflation data. According to Sina Finance, South Korean and Indonesian bonds led declines in Asian emerging markets on Friday, while the MSCI Emerging Markets Index dropped as much as 1.8% to a one-week low and the emerging market currency index fell 0.3%. U.S. benchmark 10-year Treasury yields climbed toward the 5% psychological level, and some investors said a break above that mark could accelerate capital outflows from emerging market assets. South Korea's 10-year government bond yield rose 9 basis points, while Indonesia's increased 6 basis points. Michael Wan, foreign exchange strategist at Mitsubishi UFJ Bank, wrote that the recent rise in U.S. yields has increasingly stemmed from tighter policy and, more importantly, higher risk premiums, posing a risk to Asian foreign exchange and rates markets. He said the main focus for global markets today is U.S. CPI data. U.S. swap market pricing showed a 70% probability of a 25-basis-point Fed rate hike in September, up from less than 60% a week earlier.

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