The new exchange traded fund (ETF) PowerShares Emerging Markets Sovereign Debt ETF (PCY) that launched last week marks the first time that emerging markets’ debt has been indexed for U.S. investors.

PCY tracks the Deutsche Bank Emerging Markets USD Liquid Balanced Index. The index focuses on "the most liquid" dollar-denominated emerging markets debt. A similarly narrow approach is used for the newly-launched SPDR Lehman International Treasury Bond ETF (BWX) and the iShares iBoxx $ High Yield Bond ETF (HYG), says James Picerno for the Capital Spectator.

As for PCY, one to three bonds are held for each country represented in the portfolio allocation. The index selects the bonds from each of the following countries when it rebalances: The countries in PCY currently include Columbia at 6.5%, Turkey at 6.4%, Brazil at 6.3%, Peru at 6.3%, Bulgaria at 6.3% and the Philippines at 6.3%. Remember though that the weightings are subject to change. PCY’s expense ratio is 0.5%.

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