{"id":39963,"date":"2018-10-31T09:06:29","date_gmt":"2018-10-31T14:06:29","guid":{"rendered":"http:\/\/olduvai.ca\/?p=39963"},"modified":"2018-10-31T09:06:29","modified_gmt":"2018-10-31T14:06:29","slug":"emerging-markets-face-a-new-problem-as-trillions-in-bonds-mature-and-soon","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=39963","title":{"rendered":"Emerging Markets Face a New Problem as Trillions in Bonds Mature \u2013 and Soon"},"content":{"rendered":"
\"\"<\/div>\n

Emerging Markets Face a New Problem as Trillions in Bonds Mature \u2013 and Soon<\/a><\/h3>\n

The U.S. dollar continues being the single<\/em> most<\/em> important<\/em> factor for the Emerging Markets.<\/p>\n

And as the dollar keeps getting stronger \u2013 it will continue crippling them.<\/p>\n

\"\"<\/p>\n

\u201cBut isn\u2019t a strong dollar supposed to be better for Emerging Markets by making their exports cheaper?\u201d<\/em><\/p>\n

Yes \u2013 and no.<\/em><\/p>\n

True, a stronger dollar does make foreign currencies cheaper \u2013 which can boost their exports.<\/p>\n

But the problem today is that Emerging Markets are bogged down with massive<\/em> amounts of dollar-denominated debts. And the weaker their currencies are \u2013 the harder it is to repay those debts.<\/p>\n

That\u2019s very important to keep in mind \u2013 especially as trillions of dollar-denominated bonds mature over the next few years.<\/p>\n

Let\u2019s take a closer look. . .<\/p>\n

Since 2009 \u2013 Emerging Market governments and corporations have gorged<\/em> on cheap dollar debt<\/a>.<\/p>\n

How?<\/p>\n

Because when the Federal Reserve cut interest rates to zero and launched three rounds of money printing (via Quantitative Easing) in attempt to save the global financial system post-2008 \u2013 two critical<\/em> things ended up happening.<\/p>\n

First<\/strong> \u2013 U.S. investors were starved for yield. Meaning they couldn\u2019t make enough interest from government bonds to meet their future obligations. So they started lending abroad to foreign countries that offered higher rates of interest (although much riskier).<\/p>\n

And even though some of these borrowers didn\u2019t deserve such favorable rates (like Turkey and Argentina and Greece) \u2013 lenders still gave them what they wanted.<\/p>\n

And<\/strong> Second<\/strong> \u2013 the Emerging Market governments and corporations saw this as an opportunity to get cheaper dollar financing. They could now get dollar loans at lower<\/em> rates of interest than what was available locally.<\/p>\n

Here\u2019s an example of a \u2018free money\u2019<\/em> tactic Emerging Markets would do with their cheaper U.S. debt. . .<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Emerging Markets Face a New Problem as Trillions in Bonds Mature \u2013 and Soon The U.S. dollar continues being the single most important factor for the Emerging Markets. And as the dollar keeps getting stronger \u2013 it will continue crippling them. \u201cBut isn\u2019t a strong dollar supposed to be better for Emerging Markets by making […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[19913,88,195,1732,22715,19915,839],"class_list":["post-39963","post","type-post","status-publish","format-standard","hentry","category-economics","tag-adem-tumerkan","tag-bonds","tag-debt","tag-emerging-markets","tag-maturing-bonds","tag-palisade-research","tag-us-dollar"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39963","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=39963"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39963\/revisions"}],"predecessor-version":[{"id":39964,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39963\/revisions\/39964"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=39963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=39963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=39963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}