Lagos: Since the emerging-market sell-off began about a month ago, all assets have taken a hit, but none more so than local currency bonds.

They’ve lost 5.3 per cent in dollar terms, more than Eurobonds, stocks or currencies. The pain’s been particularly acute for holders of Argentine peso, Turkish lira or Mexican peso debt, all of which have fallen more than 10 per cent (23 per cent in Argentina’s case), according to data compiled by Bloomberg.

Morgan Stanley, for one, doubts a correction is coming. It said this week that emerging-market investors should be bullish about dollar securities and FX, but that local-currency bonds weren’t as attractive. The New York-based lender thinks their recovery will be hindered by a probable rise in inflation in developing nations and by their low spreads over US Treasures in real terms.

The vulnerability of local debt has been reflected among exchange-traded funds. The biggest one tracking such bonds — the iShares J.P. Morgan EM Local Government-Bond ETF — hasn’t seen any net inflows since mid-March. Net outflows total $560 million (Dh2.05 billion) so far this month, the most since November 2016, when Donald Trump was elected US president. That’s contributed to its market capitalisation plummeting to $6.4 billion from almost $8 billion in early April.