If the Federal Reserve hikes rates, emerging market companies that borrowed overseas are more susceptible to foreign capital swings and could find it more difficult to refinance debt. Moreover, a strengthening dollar makes it costlier to pay off dollar-denominated bonds.

PCY, which has a 30-day SEC yield of just under 5.3% and a modified duration of 8.5 years, features some exposure to Central European and African economies, regions highlighted by Goldman Sachs. Those regions combine for over 10% of the ETF’s top 10 holdings.

“Goldman is shifting its preference to investment-grade debt from high yielders because economies with lower leverage and more local-currency denominated liabilities are likely to be less impacted by strength in the dollar, Matheny and Grut said,” according to Bloomberg.

EMLC, which holds bonds denominated in local currencies, allocates about 23% of currency weight to bonds from Central and Eastern European issuers. Poland is that ETF’s largest country weight, followed by Mexico.

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