As US real yields rise, emerging markets get hit? 18-june 2013

The chart below is the US ten year note yield – US ten year inflation index note yield (the red line, often cited as a proxy for long term inflation expectations) AND the Brazil stock market (IBOVESPA). The red chart shows that US inflation expectations have fallen this year from 260 bps to around 210 bps currently. The idea is that as real yields go higher in the US, money is siphoned out of emerging markets. In the chart below, it looks to be opposite…that Brazil has led the way lower. The point is that as inflation expectations decline, emerging equity markets take notice. May just be that declining inflation expectations are the result of less central bank accommodation.

IBOV vs GT10 - tip



Posted on June 18, 2013 at 9:22 am by alexmanzara · Permalink
In: Eurodollar Options

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