Headlines earlier this week concerned Emerging Markets currencies hitting a 10 year low versus the U.S. Dollar, and in spite of a brief respite, the weakness there continues today, reference CEW (WisdomTree Emerging Currency Fund, Expense Ratio 0.55%).
How are Emerging Markets bonds holding up given the recent distress? EMB (iShares JP Morgan USD Emerging Markets Bond, Expense Ratio 0.60%) has seen some moderate outflows in recent days (approximately $250 million) but this does not change the fact that the fund still has $4.8 billion in assets under management.
EMB has fallen rather sharply in recent sessions on heavier than average volume, plunging dangerously through its 200 day MA. The fund’s yield has risen to 4.23% in EMB, and it is important to note that the ETF currently holds 275 individual issues.
We see some of the highest weighted issues in the fund coming from Russia (1.80%), Poland (1.24%), Argentina (1.06%), and so on. There is clearly well diversified exposure across dozens of Emerging countries, and just about 10.5% of the overall weightings are across the top ten positions.
Other Emerging Markets Bond products that have been under pressure lately given the potentially toxic confluence and backdrop of 1) falling currency value versus the USD (in terms of Emerging Markets on the whole, sparing China given their ability to peg the Yuan 2) falling stock markets across the EM space (EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) is trading at its lowest levels since this spring this morning ($39 handle) 3) and falling bond prices on the Emerging Market “basket” level (and rising yields), which is evident in looking at EMB and related products at these levels.
EMB is not the only game in town in the EM bond space that should see heightened activity in this environment, as we are also watching some of the other biggest funds in the segment like PCY (PowerShares Emerging
Markets Sovereign Debt, Expense Ratio 0.50%), EMLC (Market Vectors Emerging Markets Local Currency Bond, Expense Ratio 0.47%) and ELD (WT Emerging Markets Local Debt, Expense Ratio 0.55%).