Concerns about the ongoing U.S crisis in the housing sector and the asset exposures to subprime mortgages dominated financial markets in the second and third quarters of 2007. Volatility spiked in July and August, with losses in the subprime mortgage sector spreading to other risky assets. The volatility radiating from the United States is changing the global backdrop for emerging markets. This change comes after several years when the combination of improvement in country macroeconomic policies and strong risk appetites led to strong flows of new money to the emerging markets asset classes. Emerging markets and Latin American spreads widened in the second and third quarters of 2007. In the second quarter, the JPMorgan EMBI+ Latin American composite widened by 22 basis points. The widening was a result of higher spreads for Argentina, Ecuador and Venezuela, with spreads narrowing for all the other countries in the composite. In the third quarter, emerging markets and Latin American spreads widened as global risk appetite declined in face of increased volatility and spillover effects from the deepening of the U.S. housing sector's problems. The EMBI+ Latin American composite widened by 25 basis points, increasing for most countries in the composite. Argentina and Venezuela's bond spreads showed the biggest increases in the quarter. Spreads remain at low historic levels, however, and the recent increase in global volatility has put much less stress on emerging markets than it would have four or five years ago. Moreover, emerging market spreads are roughly half of the spreads on U.S. junk (high-yield) bonds, and have been under less pressure during the current turbulence in financial markets.