With the low rates in U.S. Treasury bonds these days, investors are looking to emerging markets (EM) for that hard-to-find yield. Invesco offers four EM debt ETFs that give investors exposure to EM debt while limiting duration risk.

These Invesco BulletShares® ETFs are based on the Nasdaq Bulletshares® USD Emerging Markets Debt Index (Index). All funds invest at least 80% of its total assets in corporate bonds that comprise the Index.

The Index is designed to represent the performance of a held-to-maturity portfolio of US dollar-denominated, emerging markets bonds with effective maturities in 2021, 2022, 2023, and 2024. The funds do not purchase all of the securities in the index; instead, utilize a “sampling” methodology to seek to achieve investment objectives.

  1. Invesco BulletShares 2021 USD Emerging Markets Debt ETF (BSAE): The Invesco BulletShares® 2021 USD Emerging Markets Debt ETF (Fund) is based on the Nasdaq Bulletshares® USD Emerging Markets Debt 2021 Index (Index). The Fund has a designated year of maturity of 2021 and will terminate on or about Dec. 31, 2021.
  2. Invesco BulletShares 2022 USD Emerging Markets Debt ETF (BSBE): The Invesco BulletShares® 2022 USD Emerging Markets Debt ETF (Fund) is based on the Nasdaq Bulletshares® USD Emerging Markets Debt 2022 Index (Index). The Fund has a designated year of maturity of 2022 and will terminate on or about Dec. 31, 2022.
  3. Invesco BulletShares 2023 USD Emerging Markets Debt ETF (BSCE): The Invesco BulletShares® 2023 USD Emerging Markets Debt ETF (Fund) is based on the Nasdaq Bulletshares® USD Emerging Markets Debt 2023 Index (Index). The Fund has a designated year of maturity of 2023 and will terminate on or about Dec. 31, 2023.
  4. Invesco BulletShares 2024 USD Emerging Markets Debt ETF (BSDE): The Invesco BulletShares® 2024 USD Emerging Markets Debt ETF (Fund) is based on the Nasdaq Bulletshares® USD Emerging Markets Debt 2024 Index (Index). The Fund has a designated year of maturity of 2024 and will terminate on or about Dec. 31, 2024.

Why Stay on the Short Side of EM?

As a vaccine rally continues to power the markets, a risk-on sentiment is fueling a flight from bonds to equities. ETF investors should limit duration risk if equities continue to outshine bonds as global economies return to normal.

“Stocks are edging out bonds as the choice of 2021 in emerging markets,” noted a Bloomberg article. “The world’s biggest money managers, from BlackRock to J.P. Morgan and UBS, are betting the post-pandemic economic recovery will be so swift that it’s no longer necessary to be content with the single-digit yields of developing-nation debt.”

“Every standard framework model you use in finance would mean that equities will do better than bonds in 2021,” said Michael Bolliger, the Zurich-based head of emerging market asset allocation at UBS Group’s wealth management division. “Rebalancing tactically makes sense at this point. Our base-case scenario is that the world returns to normalcy and we will see a catch-up in growth and in cyclical markets.”

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