As the world’s largest bond manager, what PIMCO does is closely watched. So, when they reduced their holdings of U.S. government debt, people took notice. And when they increased their holdings of emerging market debt, that really got some attention.
The waning appetite for for U.S. Treasuries because of unusually low interest rates is a story to watch closely for two reasons. Matthew McCall for Index Universe explains that first, it will lead to higher interest rates in the U.S. to simply attract money back into Treasurys. Secondly, bonds issued by other countries, particular those in emerging markets that offer higher yields, will be in higher demand. [Top 5 Emerging Market ETFs.]
PIMCO recently reduced holdings in U.S. government debt, while upping emerging market debt exposure to 11%.The largest foreign holder of U.S. Treasuries, China, decreased its holdings for the second straight month. They fell $24 billion, or 2.7%, to $843 billion. [Strategies For Emerging Market Debt.]
You, too, can invest in emerging market debt by using ETFs. There are four ways to get exposure to emerging market debt:
- iShares JP Morgan USD Emerging Markets Bond Fund (NYSEArca: EMB): The top countries are Russia, Brazil, Mexico, Turkey and the Philippines; yields 4.7%.
- PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY): The top countries include Bulgaria, Uruguay, Russia, Vietnam, Turkey and Indonesia; yields 5.53%.
- WisdomTree Emerging Markets Local Debt (NYSEArca: ELD): Top countries include Malaysia, Brazil, Mexico, Indonesia, Thailand and South Africa.
- Market Vectors Emerging Market Bond ETF (NYSEArca: EMLC): Top countries include Thailand, Poland, Turkey, Hungary and Malaysia; yields 6.45%.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.