(Bloomberg) -- Developing-world bonds weakened along with stocks on Tuesday as investors weigh the prospect of slower US interest-rate cuts, pushing US yields higher.
A Bloomberg index for emerging-market dollar sovereign bonds declined for a third day as US Treasuries extended Monday’s sharp losses, with the 10-year yield rising back above 4.20% for the first time since July. Globally rising yields hit risk appetite while an MSCI gauge for EM stocks also dropped 0.6%.
A combination of rising yields and US politics is increasing pressure on emerging-markets, according to Piotr Matys of InTouch Capital Markets. “Developments in US politics remain a major source of concerns for emerging markets,” he said, “especially those economies that mainly rely on global trade, which could be significantly impacted if former President Donald Trump returns to the White House.”
Emerging Asia currencies led declines while currencies from Hungary, Mexico and Poland led gains. The MSCI gauge for developing world currencies weakened 0.1%.
Traders are dialing back bets on aggressive rate cuts given the US economy remains robust and Fed officials this week sounded a cautious tone over the path of easing. Rising oil prices and the prospect of bigger fiscal deficits after the US presidential election also add to concerns.
Elsewhere, Hungary’s central bank is set to hold its key interest rate at 6.5%, according to the consensus estimate of economists surveyed by Bloomberg. The decision will be announced at 2 p.m. in Budapest, followed by a statement and a briefing an hour later.
The rand is trading at its strongest levels in two weeks ahead of South Africa’s inflation data, that’s expected to show annual inflation eased by 0.4%, strengthening the case for another rate cut at the central bank’s November meeting.
Sri Lankan authorities attending International Monetary Fund meetings in Washington this week are especially discussing the nation’s debt restructuring with international bondholders, according to a cabinet spokesperson.
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