Emerging market bond ETFs are beginning to have their moment in the sun. For instance, the broad VanEck Vectors Emerging Markets Aggregate Bond ETF (NYSEArca: EMAG), which includes a combination of U.S. dollar-, euro- and local currency-denominated bonds, has gained 7.5% year-to-date. EMAG also comes with an attractive 4.45% 30-day SEC yield.
The VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (NYSEArca: EMLC), which tracks emerging market bonds denominated in the local currencies or in the currency of the issuing country, rose 10.1% year-to-date. EMCL has a 5.72% 30-day SEC yield.
Additionally, the VanEck Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM), which targets USD-denominated speculative-grade emerging-market bonds, increased 8.9% so far this year. HYEM has a 7.34% 30-day SEC yield.
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“Over the long term, an allocation to EM bonds can potentially provide both yield enhancement and diversification benefits within a broader portfolio,” Sokol said in a note. “EM bond yields have risen since early 2013, reflecting the market’s assessment of creditworthiness, and may offer a yield premium versus developed bond market yields. Low correlation with other asset classes, including core fixed income sectors, may improve a portfolio’s diversification.”
For more information on the fixed-income market, visit our bond ETFs category.