They are now cheaper, and some advocates have backtracked: much bad news is indeed in the price.
Even so, emerging markets may remain vulnerable until developed yield curves have steepened still further.
Kevin Gardiner is chief investment officer of Europe at Barclays Wealth and Investment Management
Benefits and risks: what to watch out for
Hilary Coghill, chief investment officer, highlights the pros and cons for the fixed income asset class in the current market environment:
Positives
• S&P upgraded the US sovereign credit outlook to stable from negative
• Bank of England governor, Mark Carney gave an indication that UK interest rates will continue to remain low
• UK CPI fell to 2.8 per cent in July from 2.9 per cent in June and the RPI fell to 3.1 per cent from 3.3 per cent
Negatives
• While US treasuries are less expensive than they were a few months ago, the suggestion that the FOMC will begin tapering this month, suggests they are likely to remain weak, and a further sell-off may be experienced
• Bond market liquidity remains difficult and has been exacerbated by a recent lack of issuance and large outflows from mutual funds
• Emerging market debt, particularly local currency, looks set for further retrenchment as investors move to perceived safe havens
