Global bond markets are finding a bid today following a week of carnage that has seen bond yields in developed market economies and, especially, emerging market economies spike higher. The exodus from emerging market bond markets has seen some of the popular exchange-traded funds (ETFs) with exposure to these countries drop more than 10 percent of their value over the past month compared with about 4 percent if we look at longer-dated US bond ETFs.

The exodus from emerging market assets amounted to around 15 billion during the first half of June, the second highest on record as fund managers worried about a hard landing in China, according to a recent survey from BofA ML.


The rise in US 10-year treasury yields has, for now, come to a halt around the 2.5 percent level while yield spreads between core and non-core European bonds have contracted. The 10-year spread between Italy and Germany touched 300 basis points yesterday which was the widest level since mid-April. Investors are scaling back exposure ahead of the month end and the summer break, which can not come soon enough for many after the events of the past couple of weeks.


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