US investment in global bonds: as the Fed pushes, some EMEs pull

John Burger, Rajeswari Sengupta, Francis Warnock and Veronica Warnock

Economic Policy, 2015, vol. 30, issue 84, 729-766

Abstract: We analyse reallocations within the international bond portfolios of US investors. The most striking empirical observation is a steady increase in US investors’ allocations towards emerging market local currency bonds, unabated by the global financial crisis and accelerating in the post-crisis period. Part of the increase in emerging market economy (EME) allocations is associated with global ‘push’ factors such as low US long-term interest rates and unconventional monetary policy as well as subdued risk aversion/expected volatility. But also evident is investor differentiation among EMEs, with the largest reallocations going to those EMEs with strong macroeconomic fundamentals such as less volatile inflation and more positive current account balances.

Date: 2015
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Working Paper: U.S. Investment in global bonds: As the fed pushes, some EMEs pull (2015)
Working Paper: U.S. Investment in Global Bonds: As the Fed Pushes, Some EMEs Pull (2014)
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