“The quality and diversification help to explain why default rates in emerging markets corporates have been lower on average than in U.S. corporates. And because the bonds are denominated in U.S. dollars, investors are not taking on additional currency risk in their portfolios,” Rodilosso said.
Investors who are interested in emerging market high-yield bond exposure can take a look at something like the VanEck Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM), which tracks the BofA Merrill Lynch Diversified High Yield US Emerging Markets Corporate Plus Index. The ETF holds a number of U.S. dollar-denominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade, offering investors attractive yields. HYEM comes with a 5.73% 30-day SEC yield and a 3.60 year duration.
On-Demand Webcast: High Yield ETFs to Provide a Cushion Against Rising Rates
The bond ETF includes a 13.5% position in Chinese debt, followed by 9.9% Brazil, 9.0% Russia, 8.9% Turkey and 8.0% Argentina. Top sector weights include financial 39.7%, energy 17.4%, basic materials 8.7%, industrial 6.3% and government 6.2%.
The credit quality includes investment-grade BBB 0.4%, along with speculative-grade BB 60.7%, B 30.8%, CCC 4.7% and CC 2.3%.
For more information on the fixed-income market, visit our bond ETFs category.