The external backdrop for EM bonds has become more challenging with rising US rates, a stronger US dollar, headwinds from higher energy and food prices as well as a slowing China. As such, the higher term premium seen in EM rates isn’t surprising but EM investors need to assess whether enough compensation is provided. Risks of stagflation or taper tension may also mean higher equilibrium rates in certain markets. In order to identify the value, we decompose government bond yields into two components: the risk neutral rate (expectations of short-term rates over the bond tenor) and term premium (compensation for taking duration risk). We find that risk neutral yields are justifiably high in Brazil, too high in Russia and too low in India.