Morgan Stanley analysts believe that while emerging market fixed income and foreign exchange assets are under pressure amid sharply rising US Treasury yields and a strengthening dollar, they are likely to see an orderly adjustment rather than a violent sell-off. The bank noted that the sensitivity of external shocks transmitted to emerging markets has significantly increased, with the divergence between local currency bond inflows and returns being the largest since 2013. Despite thinning spread buffers, Morgan Stanley maintains its bullish stance on carry trades in Egypt and Nigeria and advises investors to adopt defensive strategies to hedge against further dollar strength, particularly focusing on the South African Rand and Mexican Peso.