EM staying in strong demand. Despite easing commodity prices (Dalian iron ore futures sliding 6% to an 11-week low, rebar futures off by 4%, oil turning lower despite OPEC recommending extension of oil output cut, Baker Hughes US rig count rising to 652showing the 10th successive gain), EM currencies should remain in demand. Friday did see Colombia cutting rates by 25bp to 7%, with easing inflation rates providing monetary easing potential and China reported Jan-Feb industrial profits surging 31.5%Y due to faster growth in prices of coal, steel and crude. The spread between DM and EM inflation has fallen to its lowest level in 20 years, catapulting EM real rates higher. It is the EM supportive real rate differential keeping EM currencies supported despite currently falling commodity prices. In addition, declining foreign funding needs have reduced EM’s vulnerability should international funding costs rise. However, US long end bond yields have come off, pushed lower by investors scaling back on hopes of an early and aggressive US tax reform increasing US capital demand. Adding to the US yield downside pressure has been the sharp decline of USD funding costs signaled by USDJPY 3m cross currency basis tightening by 68bp from its November highs. Declining USD hedging costs have increased the attractiveness of investing into currency-hedged USD-denominated bond holdings for foreign investors, adding to the yield downward pressure.