According to Research Affiliates LLC, merging-market assets are so cheap that they may be “the trade of a decade,” reports Ye Xie for Bloomberg.
With borrowing costs at the highest levels since the global financial downturn, fixed-income investors are being well compensated for any further risks, like falling commodity prices or a China slowdown.
For instance, the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB) has a 6.88 year duration and a 5.58% 30-day SEC yield. The PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY) has a 7.83 year duration and a 4.68% 30-day SEC yield. The Vanguard Emerging Markets Government Bond ETF (NasdaqGM: VWOB) has a 6.2 year duration and a 5.13% 30-day SEC yield.
In contrast, a similar duration Treasury bond ETF, the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) has a duration of 7.53 years and a 1.52% 30-day SEC yield.
Additionally, local-currency emerging market bond ETFs have also produced some attractive yield opportunities. For example, the iShares Emerging Markets Local Currency Bond ETF (NYSEArca: LEMB) has a 4.75 year duration and a 4.23% 30-day SEC yield. The Market Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) has a 4.74 year duration and a 6.16% 30-day SEC yield. The actively managed WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD) has a 4.92 year duration and a 6.04% 30-day SEC yield.
Max Chen contributed to this article.