Short Lived

“Effect on US rates of EM financial crises is short-lived and, on average, mainly concentrated in 30 days after crisis unfolds – turning to recent turmoil in EM, move in USTs since beginning of year fits historical pattern well. (i) Our case studies and “event dates” are defined as follows: 1) the Mexican crisis that started on December 19, 1994, 2) the East Asian crisis that began in Thailand on July 1, 1997, 3) the Russian crisis that started on August 25, 1998, 4) the Brazilian one initiated on January 12, 1999 and 5) the Turkish crisis that began on February 21, 2001. (ii) We find that total returns of an investment in US Treasuries of all maturities were positive over the 60-day window starting 30 days before the beginning of the crisis and ending 30 days after. However, total returns from a UST investment dropped significantly over the subsequent 30 days and longer-dated bond returns were, on average, negative.” (Goldman Sachs)

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