Moreover, the quickly appreciating U.S. dollar has not been any help to borrowers with U.S. dollar-denominated loans. The stronger dollar makes repayments costlier for emerging market borrowers since it takes more local currency to repay a single dollar than it did before the surge in the greenback against foreign currencies mid-2014.

Companies in China have a large exposure to USD-denominated debt. Chinese companies made up 62% of all U.S. dollar bond sales in the Asia Pacific region ex-Japan in 2014, issuing $244.4 billion of $392.5 billion worth of loans.

Looking at potential risks in the fixed-income ETF space, the strengthening U.S. dollar could raise credit risk for emerging market bond ETFs as an appreciating dollar would make it harder for emerging market companies to repay debt obligations. The iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB) and the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY), which both track USD-denominated emerging market debt securities, have increased 6.2% and 8.9%, respectively, over the past year. [King Dollar Makes a Pauper of Some EM Bond ETFs]

For more information on the fixed-income market, visit our bond ETFs category.

Max Chen contributed to this article.

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