Where to find yield

Investors turn to emerging markets to find yield, despite recent pessimistic speculation surrounding the upcoming US Federal Reserve (Fed) interest rate hike.

“Although skittishness over a possible Federal Reserve rate hike may continue in September, the climate appears to remain supportive for emerging markets debt … In August, hard currency sovereign bonds returned 1.79%, outperforming local currency sovereign bonds, which returned 0.04% (all returns are stated in U.S. dollar terms), and corporates which returned 1.18%. Returns of hard currency bonds were driven by a tightening of spreads over U.S. Treasuries. Local currencies detracted from positive local bond returns as the U.S. dollar showed strength amid expectations of a rate increase," said Fran Rodilosso, VanEck portfolio manager.

VanEck highlights several high-performing emerging market funds:

  • ChinaAMC China Bond ETF (CBON ) (up 0.5% over one month, down 1.3% YTD) (market cap $7 million)

  • Emerging Markets Aggregate Bond ETF (EMAG ) (down 1.5% 1mo, up 7.8% YTD) (mcap $15 million)

  • J.P. Morgan EM Local Currency Bond ETF (EMLC) (down 3% 1mo, up 9.9% YTD) (mcap $2.1 billion)

  • Emerging Markets High Yield Bond ETF (HYEM) (down 0.7% 1mo, up 9.6% YTD) (mcap $305 million)

  • International High Yield Bond ETF (IHY) (down 1%, up 8.4%) (mcap $132 million)

  • The iShares J.P. Morgan USD Emerging Market Bond ETF (EMB), market cap $9.1 billion, is down 1.8% over the past month, and up 9% year to date.

Read more at Barron's.