“Over the years as investors have become more comfortable with emerging-markets bonds, issuers have lengthened the average maturity of their issues to 10-20 years. The ETFs in this group have average durations between 7 and 9 years, so if interest rates rise substantially, the long duration of these bonds will likely cause high volatility and negative returns,” according to Morningstar analyst Timothy Strauts.
Assuming a legitimate rebound in dollar-denominated emerging markets sovereign debt materializes, a short duration option for investors to consider is the newly-minted ProShares Short Term USD Emerging Markets Bond ETF (BATS: EMSH). EMSH has a 30-day SEC yield of 4%, but its modified duration is just 2.17 years.
iShares J.P. Morgan USD Emerging Markets Bond ETF
ETF Trends editorial team contributed to this piece. Tom Lydon’s clients own