“Local yield are now 7.2%, which is significantly higher than where we started the year,” added Sokol. “I think you look at that in the context of fundamentals and there’s clearly some countries that are in the headlines and some that continue to be like Turkey that are suffering from certain political or economic issues, but overall, fundamentals still are relatively healthy especially compared to past periods where there have been sell-offs in EM.”
Domestic High-Yield Opportunities
Investors who are still reticent with respect to emerging markets debt can still take advantage of high-yield opportunities domestically, such as the iShares iBoxx $ High Yield Corp Bd ETF (NYSEArca: HYG) and SPDR Blmbg BarclaysST HY Bd ETF (NYSEArca: SJNK). These ETFs give investors exposure to high-yield assets without the additional credit risk that may come with emerging markets debt.
HYG tracks the investment results of the Markit iBoxx® USD Liquid High Yield Index, which is comprised of high yield U.S. corporate bonds that have less than investment-grade quality. Investors who have been able to forego the credit risk have seen total returns of 5.49% the last three years and 1.96% the past year based on Yahoo! Finance performance figures.
SJNK seeks to provide investment results that correspond generally to the price and yield performance of the Bloomberg Barclays US High Yield 350mn Cash Pay 0-5 Yr 2% Capped Index. SJNK invests its total assets in the securities comprising the index, which is designed to measure the performance of short-term publicly issued U.S. dollar-denominated high yield corporate bonds. The short-term maturities will help hedge some credit risk due to the lesser exposure, but holdings are still less than investment-grade. SJNK has returned 3.12% year-to-date, 4.09% the past year and 5.53% the last three years.
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