EMB and PCY will be less affected by depreciating emerging market currencies against the U.S. dollar. For instance, the largest emerging market local currency bond ETF, WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD), which is subject to currency risks, has declined 3.7% over the past month, whereas EMB is down 2.7% and PCY is relatively flat.
Emerging market debt ETFs also hold a significant weight toward investment-grade debt. EMB’s credit breakdown includes investment grade AA 3.2%, A 8.1% and BBB 45.6%. PCY includes investment grade AA 4%, A 9% and BBB 48%.
Moreover, emerging debt provide attractive yields. EMB comes with a 5.05% 30-day expense ratio, while PCY offers a 5.17% 30-day SEC yield.
For more information on bonds, visit our bond ETFs category.
Tom Lydon’s clients own shares of EMB.