ETF Trends
ETF Trends

ETFs indexed to dollar-denominated debt in emerging market countries have risen to lifetime highs on favorable currency winds and investors chasing yield.

The iShares JP Morgan USD Emerging Markets Bond Fund (NYSEArca: EMB) and PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY) have delivered total returns of more than 10% so far this year.

Because the ETFs invest in U.S. dollar-denominated bonds, a stronger greenback has helped them outperform rivals that don’t hedge their foreign-currency exposure. [Why These Emerging Market Bond ETFs are Outperforming]

Both funds are currently yielding more than 4%.

“This fund provides low-cost exposure to a basket of emerging-markets government bonds. Low debt levels in the emerging world make defaults less likely,” investment researcher Morningstar says in a report on PCY. “Increased investor demand has lowered yields. The fund’s average credit rating is below investment grade, and the sector has had multiple defaults in the past 20 years.” [Emerging Market Bond ETFs to Consider]

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