Is The Global Debt Market Forced To A Desperate Situation? Will Emerging Markets Be Washed Again?

With the Federal Reserve and the European Central Bank turning hawks, investors frantically sell bonds and the ten year US bond yields rose to 2.6% of the risk line, four years ago, the QE taper tantrum seemed to be staged again, but this emerging market performance is quite different from that of four years ago.

Although dollar denominated debt has increased in many countries, there has been a reduction in the size of the US dollar credit in one area, namely, Central Europe, Eastern Europe and southeastern Europe, that is, the emerging European region, whose debt shrank by 8 billion US dollars in the second to the third quarter of 2016.

In the summer of 2013, when Bernanke, the then chairman of the Federal Reserve, announced that the Federal Reserve would gradually reduce the size of the debt purchase, causing panic among investors, especially investors in emerging market areas, frantically selling bonds, pushing bond market yields up sharply, and emerging market currencies sharply depreciating, thereby triggering the "QE reduction panic disorder".

The most disastrous emerging market currencies include South African rand, Turkey lira, Brazil Real and Argentina peso, of which Argentina is peso.

The single day plunge was more than 15%. In Ukraine, greeneva fell to a 4 year low against the US dollar, and the offshore renminbi also fell sharply in early 2014.

Now, the world's major central banks have joined hands to end the easing cycle, and the global bond market has been pushed to a desperate state.

However, with the experience of bloodbath four years ago, the emerging market countries have done some protective measures to resist the Fed's interest rate increase - increasing foreign exchange reserves, perhaps the reason why the emerging market currencies are showing signs of weakness.

Emerging economies

After two years of sharp decline, it has stabilized.

Of the 30 largest emerging markets, 2/3 of the economies grew in foreign exchange reserves last year, and Israel, Vietnam and Czech Republic had a record high in terms of foreign exchange reserves.

The balance of foreign exchange reserves in February also increased by 6 billion 900 million US dollars, the first recovery in eight months and the 3 trillion dollar mark.

The increasing amount of foreign exchange reserves also shows that central bank officials are worried about the world

The US dollar is being increased.

The rise in foreign exchange reserves often gives investors relief because these data show that countries are capable of dealing with market crises or economic slump that impact their foreign exchange.

Foreign exchange reserves are especially important for emerging markets that are growing fast but not completely stable. Such reserves are usually used to pay for imported goods and repay foreign currency debt.

Not only is the emerging market currency stable, but there are even analysts who believe that some emerging market assets are worth investing in the wake of the global easing.

ZeroHedge, a well-known financial blogger, said that as the Federal Reserve meeting approached, emerging markets could face pressure again, and the price of oil would drop. Some emerging countries, especially commodity exporters like Brazil, could suffer losses.

But not all emerging markets suffer the same.

In view of this, if investors want to seek refuge, emerging Europe may be ideal.

Economies in the region are growing faster than the euro area because they are still integrated with the rich European countries.

As inflation bottoms up, some major countries, such as Poland, Hungary, Czech, Romania and Slovakia, may continue to provide short-term incentives.

Of course, although emerging Europe seems to be very safe for investors in the short term, it needs to be cautious.

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