External Headwinds Start To Bite

May 2006 | Sovereign Risk Rating

When we launched our inaugural sovereign ratings index back in March, the bull market in EM sovereigns chose that week to take something of a breather. Since then, the markets have been increasingly choppy, culminating over the last week or so in something of a rout. With G3 yields heading higher, and a markedly less obvious course of US monetary policy than we have seen over the past year, uncertainty is reigning and translating into risk aversion. While rising UST yields partially explain the flight to quality, EM spread widening is outstripping the US yield increases, implying a greater perception

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