(Bloomberg) — As the worst quarter for emerging-market dollar bonds in 24 years comes to an end, a deep divide is opening up as investors focus their hopes on commodity exporters in the Middle East and Latin America.
The rapid rise in energy and food costs as the war drags on is weighing on the more vulnerable markets, becoming the latest surprise for money managers who went into 2022 expecting inflation to peak as the Federal Reserve embarked on its tightening cycle.
Now Fed officials are considering large, 50-basis point rate increases amid high inflation made more harmful by Russia’s invasion of Ukraine. That could make borrowing harder for some lower-income and commodity-importing nations, just as costs go up.
“These are challenging times for emerging-market economies,” said Goldman Sachs’s Andrew Tilton and Kamakshya Trivedi. “The economic costs of Russia’s invasion of Ukraine and the resulting sanctions are likely to be both significant and highly asymmetric.”
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