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Emerging Asia Bonds, Currencies Have Lost Their Traditional Link
Asia’s emerging-market currencies are losing their traditional close relationship to local bonds as falling hedging costs means more investors are choosing to offset their foreign-exchange risks. The correlation is also breaking down as China’s gloomy outlook weighs on Asian currencies, while having little impact on regional debt markets. The average 90-day correlation between a basket of emerging Asian currencies and government bond yields has fallen to 0.1 from 0.42 at the end of last year, according to data compiled by Bloomberg. A level of 1 would mean the two move in lockstep. The breakdown in the ... (full story)