Emerging Market Economy Exchange Rates and Local Currency Bond Markets Amid the Covid-19 Pandemic [open pdf - 0B]
From the Key Takeaways: " Borrowing through domestic currency bonds has not insulated emerging market economies (EMEs) from the financial shock unleashed by Covid-19 [coronavirus disease 2019]; EME local currency bond spreads spiked amid sharp currency depreciations and capital outflows.  Portfolio investors face amplified losses as local currency spreads and exchange rates move in lockstep; their revised portfolio allocations in turn strengthen this correlation.  EMEs with monetary policy frameworks that are equipped to address the feedback loop between exchange rate depreciation and capital outflows stand a better chance of weathering the financial fallout from the Covid-19 pandemic.  To counter large stock adjustments in domestic bond markets, EME central banks may need to expand their toolkit to take on a 'dealer of last resort' role; a number of them are already moving in this direction."
BIS Bulletin No. 5; Bank for International Settlements No. 5
2020 Bank for International Settlements
Bank for International Settlements: https://www.bis.org/