It looked more than likely that a wave of rate cuts would keep rolling, allowing a bond rally to continue.From Brazil and Russia to Armenia and Zambia, developing countries, big and small, have been on a rate cutting spree. With hundreds of rate cuts since Jan. 2015, the average emerging market borrowing cost fell under 6 percent earlier this year from over 7 percent .JGEGDCM at the time.Fund managers’ profits too have soared in this time, with emerging local currency debt among the best performing asset classes, with dollar-based returns of 14 percent last year. At $5.5 billion in two weeks the IIF described it as the “ghost of tantrums past”.It has looked as though emerging economies had the upper hand over their old enemy — inflation. Last year it was cutting rates.The question emerging market policymakers may ask themselves has changed, said Sebastien Barbe, global head of EM research and strategy at Credit Agricole.“Now the question for many central banks is: should they increase (rates) more quickly?” he said.It is not only those that are normally vulnerable either. Even in the relatively calm backwaters of eastern Europe, the Czech central bank has warned it may have to raise rates again following a sudden slump in the crown.All that is a huge blow to fund managers who have piled into the EM asset class in anticipation the returns would continue.

Source: Egypt Today May 07, 2018 06:45 UTC