Widening Yield Gaps Raise Capital Outflow Risk in Emerging Asia
What happened
A selloff in US government bonds deepened, with the 30-year yield reaching its highest level since 2004 and the 10-year yield hitting its highest since 2007. This surge has pushed yield gaps between US Treasuries and emerging Asia bonds toward record levels, according to Stephen Chiu of Bloomberg Television. The rise in US yields could either spur foreign outflows or reduce net foreign inflows into the region's bonds.
From livemint.com
Why it matters
The widening yield gap and potential capital outflows could put downward pressure on local currencies in emerging Asia. Regional central banks may respond by keeping domestic interest rates elevated to defend currencies, which could boost borrowing costs and potentially weigh on economic growth.
From livemint.com
Who's involved
- Stephen ChiuChief emerging markets FX strategist who analyzed bond market resilience
- MalaysiaCountry whose 10-year bond yield discount to Treasuries is at its widest since 2007
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- MalaysiaSpeculative
Malaysia might face downward pressure on its local currency due to widening yield gaps with US Treasuries.
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The entities involved
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Bloomberg Television
financial and business cable news channel