Emerging market dollar-pay debt spreads were marginally tighter this week, as investor demand remained strong and inflows in to the asset class continued. The US dollar-pay JP Morgan EMBI Global index returned 12.72% (year-to-date through August 26th, 2010).

In South Africa, inflation data showed CPI at 3.7% year-over-year in July, which was lower than the expected 4%. The anticipated municipal administered price hikes and the effect of the soccer World Cup on inflation did not materialize. Local bonds were stronger on the back of the news.

The Central Bank in Hungary kept its benchmark interest rate unchanged at 5.25%, in line with market expectations. In a statement following the announcement, the governor mentioned that while inflation remains well behaved, risks of the inflation target not being met this year have increased due to the weakness of the currency. Local bonds and currency were weaker on the back of the softer risk tone.