The South African Finance Minister, Pravin Gordhan, has requested Ben Bernanke to “ensure ‘minimal damage’ to emerging markets from plans to reduce bond purchases.” Of course SA is a great example of a country that has seen its bonds sell off in recent days and weeks along with its currency (down about 10%). It is also the country that allowed this Great Indian Wedding to proceed. Special courtesies extended included the use of an Air Force base to land the guests and bypassing of customs procedures.
Elsewhere Bloomberg reports that “Bond Auctions Fail From Russia to Korea as Brazil Protests Rage.” Almost every emerging market has seen bond auctions fail including China which seems to be in the midst of a large liquidity squeeze.
The chart below of cumulative flows into emerging markets in the past couple of years thanks to extra low interest rates in the West shows how much more can be sold (if any buyer can be found of course). Yowza!