US yields are rising. The combination of growing optimism over a global recovery given vaccine progress, and the possibility of a US stimulus package have boosted risk appetite. US equities have also reached new highs this week, oil is edging higher, helped by the OPEC+ agreement to delay output increases, and dollar weakness has gathered pace. By contrast, European yields have moved deeper into negative territory (Germany now back at -0.6% and France at -0.3%) with the ECB expected to announce further asset purchases next week.

Is this rise in US yields a concern for emerging markets? The post COVID world of higher debt levels leave the potential for financing costs to become problematic and interest bills taking an ever greater share of government spending. But we are not there yet. The very low level of US rates leaves the recent move higher of little concern. And the search for yield is still significantly in EMs favour.