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.

Emerging-market stocks extended their lead over US shares in the early days of the new year, with the equity benchmark rising to a six-month high against the S&P 500 Index.

Emerging-market central banks face a Catch-22 where plunging economic growth means they can’t keep monetary conditions tight, but elevated inflation doesn’t allow them to halt rate hikes either.

November has given a glimpse of the outperformance that emerging markets can deliver in the post-stimulus world as the maturing phase of Federal Reserve tightening focuses investors’ minds on the opportunities beyond.

Some of this year’s worst-performing emerging markets will get another chance to lure back bond investors after their first round of aggressive rate hikes failed to contain inflation.