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The funny thing is that the CDX.EM index (above right) does not even include the U.A.E. The index is composed of emerging market darlings like Brazil, Turkey, and India. Yet, spreads still widened.
The market action speaks more to traders' realization that they may have been overpaying a premium for emerging markets in general. Emerging markets have generally been the beneficiaries of increased fund flows due to the dollar carry trade.
Other high beta assets like high yield (junk) also sold off (above left). Not surprising when you consider that retail investors have been piling on the train for the past few weeks.
