Dragged down by a wave of global sell-offs triggered by high oil prices, emerging market stocks and bonds declined, and the market waited for US inflation data to be released. South Korean and Indonesian bonds led the decline in emerging Asian markets on Friday. The biggest decline in the MSCI Emerging Markets Index reached 1.8%, hitting a one-week low; the Emerging Markets Currency Index fell 0.3%. US bond yields rose sharply, triggering a decline in emerging market assets. The yield on the US 10-year benchmark treasury bond is approaching the 5% psychological threshold. Some investors believe that once it breaks through this level, the outflow of assets and capital from emerging markets may accelerate. The yield on South Korea's 10-year treasury bonds rose 9 basis points, while Indonesia rose 6 basis points. Michael Wan, a foreign exchange analyst at Mitsubishi UFJ Bank, wrote that the recent rise in US bond yields “is increasingly due to austerity policies, and more importantly, higher risk premiums,” which poses a hidden danger to Asian foreign exchange and interest rate markets. “The core focus of today's global market is US CPI data.” According to pricing in the US swap market, the probability that the Federal Reserve will raise interest rates by 25 basis points in September is 70%. A week ago, this probability was still less than 60%.

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