Why It Isn't Yet Time to Worry About Emerging-Market Bonds

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Bond investors have gotten used to the trappings of a perfect emerging-market trade, thanks to synchronized global growth and a weak U.S. dollar. Are they about to be shaken out of their comfort zone?

Yields on benchmark 10-year U.S. Treasurys are ticking higher, edging above 2.70% this week on expectations of higher inflation. For now, that is causing the spread between yields on Treasurys and emerging-market bonds—already at multiyear lows—to narrow further. The deluge of cash that has flooded into emerging-market sovereign…

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