Stepping Back From Emerging Markets Bond ETFs

Last year’s enthusiasm for emerging markets bonds stoked sizable inflows to EMB, making it the world’s largest bond fund of any variety. EMB’s Europe-listed counterpart became the fifth-largest emerging markets bond fund.

However, some market observers are concerned the emerging markets bond trade is becoming a crowded trade. While yields in developed economies remain depressed, with some even trading with negative yields, emerging market bonds have quickly gained traction as one of the few areas left with attractive yields.

Emerging currencies have strengthened on improving commodity prices, notably the rebound in crude oil prices, as many developing economies are major exporters of raw materials.

Consequently, more investors are looking to emerging market yields, despite the risks associated with the developing economies.

Debt-to-GDP ratios in developing economies are far below those seen in the U.S. and the Eurozone.

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