Emerging Bond ETFs Could Offer Opportunities in New Year

A U.S. dollar-denominated investment grade sovereign emerging market bond strategy may also help investors focus on higher quality assets and avoid the volatility associated with emerging market local currencies while gaining exposure to high credit quality.

“Although these bonds may exhibit sensitivity to changes in interest rates, they could also benefit if rates retreat from their recent highs. This could occur if it appears that Trump may not be able to deliver on the growth-oriented agenda he has promised, resulting in lower inflation expectations,” Sokol said.

On the other hand, if Trump does not deliver on his promises in a timely fashion, the recent pullback in emerging currencies could reverse and help support local currency-denominated emerging debt.

Income-oriented investors have a number of ways to gain exposure to the emerging bond market, such as 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. EMAG also comes with an attractive 4.40% 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, has a 6.08% 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, has a 6.28% 30-day SEC yield.

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