I guess in many ways, the bulls have the evidence of their models’ price series on their side. But at the risk of going out on a limb, I think the general calm has something to do with not understanding the risks, a strong dose of complacency born from experience over the last decade and everything to do with the 10-year Treasury yield having stopped exactly where bulls were praying it would.
My guess is that as long as it stays below the well-advertised 3.04% yield, the working assumption is that it will do no harm. And foreign buyers may very well continue to be satisfied with concession-enhanced pricing.
I would, however, remind you to re-read the last comments from Fed Chairman Jerome Powell on the subject of U.S. monetary policy and emerging markets. What he said probably shouldn’t be taken as throw-away lines. It doesn’t sound like his reaction function to non-domestic issues will match up neatly with what investors have gotten used to.
And while we like the fantasy of emerging markets being sanguine with higher rates and dollar, we know in our hearts it isn’t true.
Exposures by both investors and borrowers have only been growing. Something to at least consider as we watch assets try to go back off to the races.