The cost of insuring emerging-market nations against default fell to the lowest in nearly a year as the dollar weakens and investors bet that less aggressive US tightening will bring relief to developing borrowers.

Local-currency debt from developing nations -- which is far more sensitive to a country’s domestic inflationary pressures than dollar denominated equivalents -- has slumped almost 9% this year, the most since at least 2008, according to a Bloomberg index.

The extra yield offered by developing-nation sovereign debt over U.S. Treasuries has risen above 500 basis points, crossing a threshold breached only two other times in more than a decade. That’s drawing money managers including FIM Partners and Vontobel Asset Management to bet spreads will quickly tumble, just like they did following the previous spikes.

Concerns that the Federal Reserve may overshoot with faster interest-rate hikes that could slow the economy have led to a flattening of the U.S. yield curve -- with shorter-dated yields rising at a faster pace.

Discerning investors could eke more gains out of developing-nation bonds, but the bulk of the rally in the riskiest corners of the market may have passed.

For all the risks of a year-end cooling-off period, emerging-market backers can’t complain about the lie of the land right now.