Global Emerging Markets Update - February 2021
11 March 2021
After the strong performance in recent months, capital markets corrected over the latter part of February. In part influenced by the sharp rise in US treasury bond yields. The first half of the month was driven by the usual positives of accelerating global growth from stimulus programs, declining COVID-19 cases and vaccination programs commencing. Then in mid-February everything started to go into reverse when US treasury yields spiked (they have been creeping up since August 2020). The US 10-year bond yield vaulted from 1% to 1.6% in a matter of days.
It is clear that 2020 was about controlling COVID-19 through effective public policy on testing, contact tracing, social distancing, PPE (masks gloves, etc) and lock downs. However, in 2021 it seems markets have become more focussed on vaccination programs. Widespread and effective vaccinations are critical to re-establishing economic growth and stability in EM – and we worry that the programs are falling well behind schedule over this year. Therefore, it remains unclear to us that we are on the verge of a period of major monetary policy tightening.
