Emerging market local debt offer attractive yields. According to J.P. Morgan Chase & Co., local emerging market bonds yield an average 6.37%, or 63 basis points more than developing-nation U.S. dollar-denominated bonds.
Economists anticipate central banks from Turkey to Russia will cut borrowing costs as exchange rates stabilize, especially with the U.S. dollar weakening, which helped alleviate inflationary pressures.
“We’ve been bullish on EM debt since earlier in the year, we’ve noticed that emerging market U.S. dollar (USD) debt has outperformed local debt. Pending no Fed hikes this year, EM local debt (as well as several EM currencies) could start outperforming USD EM debt in the months to come,” according to the Pavillion Global note posted by Barron’s.
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VanEck Vectors J.P. Morgan EM Local Currency Bond ETF