Emerging sovereign debt markets in general, and Latin American sovereign bonds in particular, had a surprisingly good year in 2001, considering that the largest sovereign bond issuer of all time defaulted on some $100 billion of global bonds. The Argentine default was very clearly flagged, allowing virtually all professional bond investors to exit the country in good time.
At the same time, investors in US corporate debt, from Enron to WorldCom, were starting to get jittery about their own market. The parallel waves of selling - in Argentina and in US corporate debt - left bond investors sitting on far more cash than they would normally be comfortable with.
Meanwhile, emerging-market debt markets were looking healthy. Pick any bond-issuing country in the world: chances are, if it isn't Argentina, it returned more than 10% in 2001. And the returns weren't at the expense of market risk, either: volatility in JPMorgan's...
