(Bloomberg) — Record low interest rates, rising commodity prices and improved mobility data have been buoying expectations of a recovery across emerging markets even as investors cast a wary eye toward November’s U.S. presidential election.
Yet for all those plus points — and any small boost provided by a gentler geopolitical backdrop — it’s rate differentials that are sustaining much of the investor demand. Bond funds last week extended their longest streak of inflows since a 12-week run in the fourth quarter of 2017, according to EPFR Global, with China bond funds attracting “above-average” interest. Bond inflows into ETFs focused on the developing-world also offset withdrawals from stocks last week.
“Even though policy rates in emerging markets have come down a lot, many of them show meaningful relative interest-rate advantages versus the dollar now, despite benign inflation,” said Morgan Harting, a New York-based money manager at AllianceBernstein who oversees about