What was meant to be an orderly adjustment threatened to become precisely the opposite, despite the assurances by the Fed that tapering would be done in a responsible manner. Long-term bond yields and mortgage rates in the US increased by about 100 basis points.
The spillover effect on emerging markets was intense, with bond yields generally increasing by more than in the US, as bond flows reversed sharply – since May about $ billion has flowed out of emerging bond markets, with R17 billion net sales by non-residents in the domestic bond market between 22 May and the end of August; and emerging market currencies, including the rand, depreciated markedly across the board.