Early Thursday, Bloomberg conveyed a warning from the Asian Development Bank (ADB) amid the rising US Treasury yields. The news begins with, “The Asian Development Bank warned that rising U.S. yields could trigger currency and debt crises across Asia like past shocks that rocked emerging markets.”
The report quotes ADB President Masatsugu Asakawa while citing the risks of capital flights and loan defaults in case the US Treasury yields rise much as developing Asia has loaded up on dollar-denominated debt to pay for the fight against Covid-19.
Historically inverse relation between the US yields and Asian capital markets is also a part of the report citing recent weakness in Indonesian rupiah and Thai baht. To solve the problem, the ADP leader suggests tax hikes but that also has a limited acceptance in emerging economies due to the limited income source and weak economic recovery.
That said, US 10-year Treasury yields pause three-day losing streak while taking rounds to 1.62% whereas markets in Asia wobble despite vaccine and stimulus optimism by the press time.