The iShares Interest Rate Hedged Emerging Markets Bond ETF holds the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB), the largest emerging markets bond ETFs, short positions in interest rate swaps.
EMB is a popular yield play with a 30-day SEC yield of 5.04%, according to iShares data, but an effective duration of 7.24 years makes the ETF vulnerable to hawkish changes in Fed policy. EMBH helps alleviate that concern with an effective duration of just 0.22 years.
“iShares interest rate hedged ETFs are the industry’s first actively managed interest rate hedged products that can potentially benefit from the established liquidity of existing bond funds. By holding shares of EMB and CLY in combination with interest rate swaps, EMBH and CLYH provide easy access to cost effective potential solutions for investors who are attempting to mitigate interest rate risk,” according to iShares.
iShares introduced its first rate hedged ETFs in May 2014, the iShares Interest Rate Hedged Corporate Bond ETF (NYSEArca: LQDH) and the iShares Interest Rate Hedged High Yield Bond ETF (NYSEArca: HYGH).
Tom Lydon’s clients own shares of EMB.