Adverse shocks to emerging-market-economies' sovereign bond spreads lead to a short-run fall in spreads between them and relatively safe US assets. But they also lead to a widening of spreads for riskier instruments, new research from the Bank of England shows.

The research shows that a shock to emerging markets on mature economies on the one hand, means that mature economies benefit from a flight to quality, driving down the financing costs for government bonds. However, on the other, an