Emerging Market Bond ETFs Attract Record Inflows

“Investors will continue to be challenged by persistently low global bond yields. We expect flows into low cost products like ETFs to continue as investors seek to cut fees to preserve income,” Stephen Cohen, head of Fixed Income Beta at BlackRock, wrote in a note.

Investors interested in emerging market bond exposure have a number of ETF options available. For instance, the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB) is the largest emerging bond ETF available. EMB has a 7.19 year duration and a 4.47% 30-day SEC yield.

EMB tracks U.S. dollar-denominated emerging market debt securities, so the ETF is less exposed to currency risks or the negative effects of depreciating emerging currencies. Additionally, other popular USD-denominated emerging bond ETFs include the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY), which has a 8.95 year duration and a 4.73% 30-day SEC yield, and the Vanguard Emerging Markets Government Bond ETF (NasdaqGM: VWOB), which has a 6.6 year duration and a 4.14% 30-day SEC yield.

SEE MORE: A Solid Emerging Market Bond ETF Pick

Alternatively, the VanEck Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC), which has a 5.01 year duration and a 5.31% 30-day SEC yield, tracks local currency-denominated bonds, so the fund is exposed to fluctuations in the foreign currencies. However, strengthening emerging currencies, or a weakening U.S. dollar, would further bolster returns.

Additionally, while the emerging markets may be associated with greater risks, the funds’ portfolio includes quality debt. For instance, EMB includes investment-grade debt AA 2.2%, A 11.5% and BBB 41%, along with speculative-grade BB 20.3%, B 19% and CCC 5.5%.

For more information on the fixed-income market, visit our bond ETFs category.