We speak briefly this morning about the presence of near term at the money put buyers in a prominent High Yield Corporate Bond based ETF, HYG (iShares iBoxx $High Yield Corporate Bond, Expense Ratio 0.50%) on notable weakness in bond prices in the past few sessions (HYG trading at its lowest levels since early August, but it should be noted that the plunge to those August levels was met with sudden buying and a subsequent rally).
We also mention the continued bloodletting in equities Brazil and China, and much of the Emerging Markets in recent sessions, which has rippled over to the local bond markets as well. The High Yield bond offerings of Emerging Market economies are hitting more radars these days, as EMHY (iShares Emerging Markets High Yield Bond, Expense Ratio 0.65%, Yield 5.76%) has grown to about $205 million.
The fund debuted in 2012 and has exposure to U.S. dollar denominated debt issued from sovereign entities as well as corporations based in the Emerging Markets. For example, if we take a quick look at top holdings by country of issuance in EMHY, we see Venezuela, Turkey, Indonesia, Bolivia, Argentina, and so on.
These countries have clearly had some issues for the most part in 2014 at one point or another, if not currently as in the case of Turkey and ISIS. HYEM (Market Vectors Emerging Markets High Yield Bond, Expense Ratio 0.40% Yield 5.89%) also debuted in 2012 and has more than double the assets of EMHY currently (about $436 million) and also specializes in U.S. dollar denominated debt issued from Emerging Market entities.
We see exposure to countries such as Venezuela, Ireland, and Brazil for instance among some of the top weightings in the underlying index and the fund itself. Both of these funds have had strong years in 2014 in terms of attracting net assets, with HYEM adding >$211 million in new assets and EMHY to a lesser extent, adding $6 million.