While emerging market debt is considered risky because of the less developed nature of the economies, developing countries also issue investment-grade bonds. EMB’s portfolio credit quality breakdown includes investment-grade AA 2.8%, A 10.1% and BBB 42.2%, along with junk-grade BB 24.2%, B 10.6% and below B 5.0%.
The PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY), another dollar-denominated ETF, credit quality allocation includes AAA 0.8%, AA 5.8%, A 10.1%, BBB 40.8%, BB 32.1%, B 7.4% and below B 2.9%. PCY has a 4.58% 30-day SEC yield and is up 10.9% year-to-date.
Alternatively, the Market Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) tracks local currency-denominated bonds, so the ETF is subject to currency risks – a depreciating foreign currency means a lower u.s. dollar return. Credit qualities include AAA 4.6%, AA 3.4%, A 24.7%, BBB 15.0%, BB 9.3% and not rated 43.0%. EMCL has a 4.87% 30-day SEC yield and is up 5.4% year-to-date.
Additionally, the WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD) is an actively managed ETF that also holds local currency-denominated bonds. The fund leans toward investment-grade quality bonds, including AAA 3.1%, AA 11.6%, A 44.7% and BBB 30.1%. ELD has a 5.37% 30-day SEC yield and is up 4.3% year-to-date.
For more information on the fixed-income market, visit our bond ETFs category.