Mover Mike

It is becoming apparent to the financial markets that pipeline inflation is on the rise. Price pressures are starting to show up in the rate investors are seeking as protection against higher inflation. The markets are waking up to the fact that the credit markets are becoming less benign. The riesgo país (“country risk”) is rising rather than falling, which signals trouble lies ahead for the bond markets. Yields across the board are rising once again from Poland to Pakistan, from Turkey and Russia to Argentina and Brazil. Emerging market spreads are up 6 basis points to 369. That’s up from year-end when they stood at 335. Bond investors and politicians in Latin America are watching the U.S. bond markets closely and paying attention to every nuance emanating from the Fed. Rising interest rates in the U.S. means rising rates for most of Latin America. Interest rates are up in Argentina, Brazil, Uruguay, Peru, and Mexico. Junk bond yields are also rising especially after last week’s bombshell by GM.