Over 88% of EMHY’s holdings are rated BB or B while about 90% of HYEM’s holdings carry those ratings. Neither emerging markets junk bond is heavily allocated to speculative CCC-rated debt.
A more sanguine interest rate outlook in the U.S. coupled with slower global economic growth projections could be luring investors to emerging markets junk bonds over equities.
“Now that we no longer see the Federal Reserve raising rates this year, a major overhang has been lifted for emerging markets’ dollar issues,” notes Financial Express. “Stocks, on the other hand, need better earnings prospects, which no one is expecting. After all, the International Monetary Fund just lowered its global economic outlook again.”
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