Wrong Place, Wrong Time for This EM Bond ETF

Indonesian bonds have been strong for a decent part of 2014, but at 12% of EMHY, the country represents less than half the combined weight the ETF allocates to Turkey and Venezuela. However, “the lack of structural reform in Indonesia, the onset of parliamentary and presidential elections in April and July respectively, and its increased foreign-currency requirements stemming from a weak balance-of-payments position exacerbated by US tapering suggests Indonesian bonds will struggle this year,” according to EuroMoney.

Ukraine government bonds rest near two-month highs and the country is dealing with deadly protests, a road traversed by Turkey last year. Additionally, Hungary’s scorched-earth rate-cutting campaign along with the belief that the country is vulnerable to the loss of U.S. stimulus has adversely impacted demand for that nation’s sovereign debt.

Hungary and Ukraine combine for almost 7.6% of EMHY’s weight.

iShares Emerging Markets High Yield Bond ETF