Emerging Relief

The unfreezing of short-term dollar markets should continue to feed into a shift in the emerging markets, as a posture of all-out risk abhorrence continues to ease. To the extent the worst-case default scenario of is being taken off the table, spreads are likely to continue to move back in the direction of normal. The emerging market economies are not out of the woods yet -- governments may yet have to intervene to stave off debt problems, and at the end of the day, inflation will resurface as a growth-limiting concern.