The Bond Market Just Sent a Disturbing Message
As this article by Bloomberg reports there is reduced interest in the long maturity benchmark US bonds. This is bad news for the $52 trillion sovereign debt market and its EM section in particular. Investors seem wary of putting their money in long-term instruments, thus the maturities sovereigns will need to offer are shorter and shorter. This may create a debt spiral where EM governments will find themselves in a particularly fragile situation – similar to 1998 with a high price for refinancing and low fiscal flexibility.
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