“Real rates making new lows at this stage of the cycle is really quite curious and I’m always nervous when I feel that I don’t understand the reason for a move – the market is smarter than anyone – so I am a bit nervous.”
Dirk Willer, managing director and global head of emerging market FX and fixed income strategy at Citi Research, was revealingly frank when he spoke to Euromoney over the summer about the profound impact that US rate uncertainty is having on emerging market (EM) economies.
“The fact that almost everyone is expecting rates to rise, and maybe sharply, in the US is partly what’s holding back capital flows into EM,” he explains. Speaking in early August, he adds: “If you had told me that real rates in the US would be where they are right now, I would have certainly expected larger inflows into EM in the last couple of weeks.”
