VanEck Vectors Emerging Markets High Yield Bond ETF

Improving fundamentals and lower credit and interest rate risk has made EM high yield corporate bonds attractive this year.

Emerging market corporate bonds (HYEM) fared better in 2018 than EM sovereign and EM local bonds.

The US fixed income market saw a strong close to 2018.

According to a recent BofA Merrill Lynch Global Investment strategy report, emerging markets are expected to grow at a modest pace of 4.7% in 2017.

In recent years, emerging market (EMLC) (HYEM) ratings have improved considerably due to the strengthening macroeconomic framework as well as years of reforms.

In her speech at the Jackson Hole Economic Symposium, Fed chair Janet Yellen expressed optimism about another rate hike in the United States.

Strong Local Currency Performance As Rates Remain Steady Returns in the emerging markets debt space have so far in 2016 ranked commensurately with risk. More specifically, local debt has been the top performer, with a total return of 17.08% YTD after a very strong September (2.02%). Although local sovereigns are lower duration by nearly two […]

Strong investor interest in emerging market debt (EMLC) (HYEM) has continued despite adverse political and economic issues in some countries.

Negative bond yields in Japan and the Eurozone, coupled with very low federal funds rates in the United States, are part of why emerging market bonds and currencies have performed so well in 2016.

The Federal Reserve kept its key interest rate unchanged in its policy meeting this week while signaling a possible rate hike in December.

While around 30% of developed market bonds (IHY) are trading at negative yields, emerging market debts (HYEM) are offering attractive returns.

Brazil’s (BRF) new government is eager to implement structural reforms to strengthen fiscal responsibility, and the central bank is likely to follow suit.

Strong investor interest in emerging market debt (EMLC) (HYEM) has continued despite adverse political and economic issues in some countries.

In the wake of disappointing economic indicators over the past month, the Federal Reserve kept the interest rate unchanged in its policy meeting this week.

Current low and negative yields in developed markets have led many to look outside of core fixed income asset classes for attractive income.

It’s useful to analyze the historical returns of credit rating categories within emerging markets bonds.

Investors may also want to consider a small allocation to BB rated emerging markets countries.

In the long term, Eastern Europe is largely affected by the United Kingdom’s exit from the European Union because of its strong trade links.

While global growth statistics remain within muted expectations, EM debt and equity could remain the beneficiaries of additional capital flows for some time.

Global emerging markets (“EM”) debt, both hard and local currency, rebounded strongly in June after a significant retracement in May.

Fallen angels (ANGL) have had lower average default rates than the broad high yield bond (HYEM)(IHY) market historically (3.58% versus 4.19%).

Historically, it seems that fallen angels generally perform well across interest rate environments.

About 75% of fallen angel bonds (ANGL) were rated BB as of May 31, 2016. Original-issue investment-grade bond issuers tend to be larger.

HY EM bonds currently offer higher yields than both high yield US corporate bonds (HYG) (JNK) and high EM sovereign bonds.

Investors are flocking to government bonds (BND) of developed markets, which is causing downward pressure on interest rates.