Taking a Trip into International Debt Markets?

The global vaccination effort is pushing more and more yield-oriented fixed income investors abroad, putting the focus on funds like the Vanguard International High Dividend Yield ETF (VYMI).

Overall, VYMI:

  1. Seeks to track the performance of the FTSE All-World ex US High Dividend Yield Index.
  2. Provides a convenient way to get exposure to international stocks that are forecasted to have above-average dividend yields.
  3. Employs a passively managed, sampling strategy.

While looking overseas may offer investors global exposure to debt markets offering higher yields, it can be a slippery slope.

“Vaccine rollouts offer optimism, and countries are becoming better at coping with the economic effects of surges in COVID-19 even during lockdowns,” an S&P Global Ratings report said. “But the picture remains mixed for emerging markets, where the threat of a resurgence in cases (and the consequent drag on the economy) persists even in countries that have improved immunization rates.”

VYMI: Instilling Confidence in High Yield

VYMI offers an all-in-one option, allowing investors to navigate the international debt markets without needing to pore over copious amounts of financial data to find the best opportunities.

When compared with benchmark U.S. Treasury notes like the 10-year T-bill, the ETF also adds more yield.

VYMI Distribution Yield Chart

About 45% of the fund’s debt holdings are comprised of companies in Europe.

“In Europe, the effectiveness of government support and the strength of the economic rebound are benefitting banks by curbing the expected asset-quality deterioration,” the report said. “We remain mindful that we have yet to see the full effect of the pandemic on banks’ asset quality.”

“Nevertheless, we think the vast majority of European banks will report improved profits this year, aided by lower credit-impairment charges, and gradually improving fee and commission income,” the report added.

For more news, information, and strategy, visit the Fixed Income Channel.