Emerging market bond funds witnessed substantial outflows of $1.6 billion in the week ending December 2nd, according to data from EPFR Global. This marks the largest outflow in 13 weeks.

The outflows occurred in anticipation of the Federal Reserve’s upcoming decision on interest rates, which is widely expected to be a rate hike. Investors are concerned that a rate hike could negatively impact emerging market economies by increasing borrowing costs and potentially triggering capital flight.

Breaking down the data, emerging market bond funds denominated in local currencies saw outflows of $944 million, while hard currency funds experienced outflows of $660 million.

These outflows highlight the sensitivity of emerging market debt to changes in U.S. monetary policy. Investors are closely monitoring the Fed’s actions and adjusting their portfolios accordingly.

The potential impact of a Fed rate hike on emerging markets remains a key concern for investors. The outflows from emerging market bond funds suggest a cautious approach to the asset class as the Fed’s decision approaches.