Rate fears to boost Asian currency debt appeal

Asian local currency debt will look more appealing as US Treasury yields rise and investors' risk appetite grows.
Emerging market local currency bonds to benefit from the rise in US Treasury yields
Emerging market local currency bonds to benefit from the rise in US Treasury yields

Stronger US economic growth will push Treasury yields higher during the remaining months of 2014, according to fixed income specialists, and could help to renew interest in Asian local currency debt as investors seek out fatter returns.

With core European yields expected to remain lower for longer as the eurozone recovery wilts, currency speculators continue to search for carry trade opportunities exploiting yield differentials by borrowing in one currency and investing in another. But carry is not the only game in town.

“Carry considerations remain relevant for Asia bonds, but currency returns have recently become a more dominant component,” Andre de Silva, head of rates research for...

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