Facing the debt-ratings downgrade in the U.S. and the ongoing sovereign debt train wreck in western Europe, fixed income investors are taking a new look at government bonds from unexpected regions and accepting payment in unfamiliar currencies. Unlike previous booms in emerging market debt, which were driven principally by a search for yield, today's renewed interest reflects a changing and growth potential.

How ironic is it that the foreign reserve managers of several large emerging economies, Brazil, China and Turkey for example, are debating the conditions for making investments in bonds issued by the so-called developed countries' governments? At the same time this fall's almost daily heightening of global financial risk, while centered on the fiscal and debt problems of the developed world, struck hard at the market for emerging debt, especially at the increasing portion denominated in local emerging market currencies. In my opinion, this sell-off represents a knee-jerk, risk-off response and may create a valuable diversification opportunity for investors.

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