Emerging Market Local Debt ETFs Shine

March 23, 2017

Emerging market bond ETFs denominated in local currencies are among the best-performing fixed-income ETFs year-to-date.

They’ve come a long way from the massive hit they faced last November when the U.S. elected Trump as the new president. That sell-off then centered on renewed concerns about inflation, higher rates and a strong dollar under the new administration.

And many of these concerns remain in place. Asset management giant BlackRock’s most recent market commentary included the following about emerging market bonds:

We maintain a neutral position on emerging market bonds. While we do maintain a long-term constructive view on EM debt based upon the global reflationary trend, significant risks remain, particularly the potential for rising global rates, a stronger dollar and the introduction of policies that would negatively impact global trade, hence our near-term neutral stance on the asset class.”

But nearly five months after the election, these ETFs are leading fixed-income funds with strong performance. So far in 2017, they are among the best-performing funds among all fixed-income ETFs. Consider the chart below plotting the five best-performing EM bond ETFs year-to-date:

Chart courtesy of StockCharts.com


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