ETF Trends
ETF Trends

Developing market equities may have fallen off this year. However, emerging market bonds and related exchange traded funds are outperforming U.S. debt, and they come with more attractive yields.

Year-to-date, the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB), which has a 7.25 year duration and a 5.04% 30-day SEC yield, rose 1.6%; PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY), which has a 8.31 year durationa nd a 6.25% 30-day SEC yield, gained 1.6%; and Vanguard Emerging Markets Government Bond ETF (NasdaqGM: VWOB), which has a 6.5 year duration and a 4.63% 30-day SEC yield, returned 2.8%. These bond ETFs track emerging market sovereign and agency debt securities denominated in the U.S. dollar, which helps diminish currency risks. [Investors Turn to Emerging Market Bond ETFs for Higher Yields]

In contrast, the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF), which has a duration of 7.65 years and a 2.06% 30-day SEC yield, is up 1.7% so far this year.

Additionally, U.S. dollar-denominated emerging market bond ETFs have also produced some attractive yield opportunities. For instance, the actively managed WisdomTree Emerging Markets Corporate Bond Fund (NasdaqGS: EMCB) has a 5.11 year duration and a 5.22% 30-day SEC yield. The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (NYSEArca: EMCD) comes with a 5.75 year duration and a 4.75% 30-day SEC yield. The iShares Emerging Markets Corporate Bond ETF (NYSEArca: CEMB) has a 5.29 year duration and a 4.83% 30-day SEC yield. The emerging market corporate bond ETFs mostly include USD-denominated investment-grade quality debt, with about a 20% tilt toward speculative-grade securities. Year-to-date, EMCB was up 0.9%, EMCD was 1.8% higher and CEMB advanced 3.0%.

Meanwhile, the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYESArca: LQD), which has a 8.13 year duration and a 3.54% 30-day SEC yield, dipped 0.7% so far this year.

Dollar-denominated bonds sold by developing country companies were among the best performers among 10 major global assets with a 3.5% return this year, reports Ya Xie for Bloomberg.

Corporate emerging market bonds outperformed developed market stocks, the S&P 500, U.S. high yield corporate debt, EM-dollar-denominated sovereign bonds, U.S. Treasuries, developed market government bonds, emerging market stocks, EM local-currency government bonds and gold, according to Bloomberg and JPMorgan data.

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