Hawkish expectations in Asia’s emerging markets are piling up as traders become increasingly convinced that central banks in the region cannot ignore the threat of domestic inflation any longer.
Goldman Sachs Group Inc is one of the latest banks to now see an “imminent” lift-off in rates in several Asian markets, including Thailand. The region’s shorter-maturity bonds, which are more sensitive to rate expectations, have spiked this quarter amid doubts about the dovish rhetoric from policy makers. Malaysia’s central bank surprised with a rate hike on Wednesday, after signalling patience in April.
An about-face from more central bankers will deepen the selloff in emerging-Asia bonds, which have already suffered losses of 7% this year, surpassing even those seen during the 2013 taper tantrum. The securities are already feeling the pain from runaway inflation and the fact that policy makers in the region are lagging behind some developed countries in raising rates isn’t helping.
