Fresh waves of turbulence engulfed emerging markets on Friday, with a renewed slide in the Russian rouble and a sharp rise in bond yields across the board despite policymakers' efforts to staunch the bleeding.
Signs grew that stress is increasingly spreading to central European countries such as Poland and Hungary, which fared relatively well in the first sell-off phase earlier this month.
Poland delayed publication of its monthly debt supply plan until next week due to market turbulence and an overhaul of its pension scheme, a day after Hungary was forced to cut a T-bill action because of a 67 bps jump in yields.
"We are in a negative feedback loop of weak currencies, higher interest rates, weak growth and capital outflows. This feedback loop needs to play out and that means at the end of the day EM assets need to become much cheaper," said David Hauner, head of EEMEA fixed income strategy and economics at Bank of America Merrill Lynch.
"Only then will people come back to buy," he added.
Hungary's central bank was the latest to wade in with assurances that it would act to soothe markets if needed, adding to earlier verbal intervention from India and Russia, as well as big rate rises in Turkey and South Africa.
But the Hungarian forint fell 1.5 percent to the euro , hitting two-year lows, while bond yields jumped 20 basis points across the curve.
"Fears are growing that if the central bank cannot stop the forint's fall in any other way, this will lead to an interest rate hike in the end," a bond trader in Budapest said.
In neighbouring Poland, 10-year bond yields rose 10 basis points to a 4-1/2 month high after the government delayed its debt supply plan and the zloty lost 0.5 percent.
The spotlight remains on the rouble. A rally that started late on Thursday proved short-lived, taking the Russian currency down more than 1 percent, back towards five-year lows against the dollar.
Analysts said the central bank's plans for "unlimited interventions" should the rouble stray outside a target band, had squeezed out short rouble positions on Thursday but the broad trend for flight was very much intact.
The lira and the rand fell almost 1 percent and South African domestic bond yields hit the highest since mid-2011, as markets priced in more rate rises in coming months.
In equity markets, MSCI's main emerging markets index traded just off 4-1/2 month lows and are on