Sun setting on emerging market bonds

Sunset i

Once seen as the hero of the investment community, emerging market bonds have completed 5 waves up from the Oct 2008 low, which is in turn a 5th Wave of a larger degree. This 5th wave up was fueled by the Federal Reserve cutting interest rates to zero, which in turn gave rise to a risk-seeking thirst for yield that drove EM Bond yields to record lows.

This trend has now exhausted itself, and we expect to see lower prices and greater defaults in emerging market bonds. Stay clear for the next few years until we see a bottom.

EMB 27-04-14 5yr