However, Rodilosso warned that the recent rebound in the U.S. dollar may pose a risk to the gains if the greenback continues to appreciate.
“With improving economic growth and controlled inflation, fundamentals appear to remain supportive for emerging markets currencies. Given that there has not been a broad-based rally this year, we believe that the asset class is not overbought and there may be room for additional appreciation. Further, emerging markets local currency bond yields remain attractive,” Rodilosso added.
Investors interested in gaining exposure to emerging market local currency bonds for their attractive yield potential may turn to options like the VanEck Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC), which tracks the J.P. Morgan GBI-EM Global Core Index, which includes decent exposure to European emerging markets include 9.1% Poland, 3.8% Hungary and 3.2% Czech.
Furthermore, bond investors may customize their credit risk exposure to emerging market debt through speculative high-yield options or more conservative investment-grade exposure, including the VanEck Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM), VanEck Vectors EM Investment Grade + BB Rated USD Sovereign Bond ETF (NYSEArca: IGEM) and VanEck Vectors Emerging Markets Aggregate Bond ETF (NYSEArca: EMAG).
For more information on the fixed-income market, visit our bond ETFs category.