In the wake of the global commodities rout which recently saw prices touch their lowest levels of the 21st century, there’s been no shortage of commentary (here or otherwise) on the pain that’s been inflicted on commodity currencies and by extension, on EM. As it stands, the world’s emerging economies face a kind of perfect storm triggered by a combination of the following factors: falling commodity prices, depressed Chinese demand, and the threat of an imminent Fed hike. All of this has contributed to capital outflows, which has in turn led some reserve managers to begin liquidating their store of USD-denominated assets to help offset the bleeding and indeed, it now looks as though Brazil will eventually be forced to capitulate and dip into the reserve cookie jar to help arrest the BRL’s terrifying slide. All of this is of course complicated by idiosyncratic political risks. Take Malaysia for instance, where the 1MDB scandal threatens the political career of Prime Minister Najib Razak. Or Brazil, where President Dilma Rousseff’s abysmal approval rating and a fractious Congress have made implementing desperately needed austerity measures virtually impossible. And there is of course Turkey, where Recep Tayyip Erdo?an has effectively plunged his country into civil war in order to preserve AKP’s dominance and pave the way for constitutional amendments that will allow him to consolidate his power. The risks facing EM are in fact so acute and closely watched that the threat of accelerating capital outflows effectively forced the Fed to delay liftoff earlier this month. With the situation deteriorating virtually by the day (and if you think we’re being hyperbolic there, just take a look at the news flow from Brazil last week), we thought it an opportune time to highlight the spike in EM credit risk as shown in the following chart: As you can see, multi-year wides on all accounts other than Russia and that's only because the spike late last year that accompanied the plunge in crude prices and attendant ruble rout have made for a tough compare. So sure, go ahead and hike Janet...