Oil Rout Sends Emerging-Market FX Debt Yields to Two-Year High

(Bloomberg) -- The yield on foreign-currency bonds of emerging economies rose to the highest in more than two years as sinking oil prices added to concerns the world economy is slowing.

The rate jumped to the highest since at least September 2016 after a record 12-day slump for West Texas Intermediate, according to Bloomberg Barclays EM Hard Currency Index. U.S. junk-bond yields also spiked to a 30-month high. Crude prices later pared losses amid renewed speculation of production cuts.

Oil Rout Sends Emerging-Market FX Debt Yields to Two-Year High
  • Russia’s $7 billion bonds maturing in June 2047, the bond with the second biggest weighting in the gauge, declined, sending the yield to the highest on record at 5.99 percent on Tuesday
  • Qatar’s $6 billion bonds maturing in April 2048 also sank.

“Lower oil prices are supportive for EM importers but the sudden drop has affected sentiment,” Trieu Pham, an emerging-market strategist at ING Groep NV in London. “This was exacerbated by growing fears of a China slowdown and spillover risk thereof for the global economy and investor sentiment.”

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