3 EM Bonds ETFs Your Broker Forgot to Mention (EMCB, PCY, LQD)
There's no shortage of chatter regarding bond ETFs these days. Thing is that chatter seems to revolve around those funds heavy on Treasuries or an ETF run by some guy named Bill Gross.
Well, to be fair municipal bond ETFs have been in the spotlight as well and there's a new junk bond ETF to look at.
None of that includes some interesting opportunities with emerging markets bond ETFs, many of which feature robust yields. Here are a few worth taking a look to add some spice to the fixed income portion of your portfolio.
PowerShares Emerging Markets Sovereign Debt ETF(NYSE: PCY) The PowerShares Emerging Markets Sovereign Debt ETF is currently found pulling back after touching a 52-week high around $28.50. It's also currently found with a yield of almost 5.3%, which is nearly 70 basis better than the rival iShares JPMorgan USD Emerging Markets Bond ETF (NYSE: EMB). Something to note: PCY's holdings are dollar-denominated and some hail from obscure emerging and frontier markets. Top country allocations currently include Pakistan, Croatia, Turkey, Indonesia and Venezuela.
Market Vectors EM Local Currency Bond ETF (NYSE: EMLC) One option for avoiding dollar-denominated EM bonds is the Market Vectors EM Local Currency Bond ETF. This ETF is full of surprises and what we mean by that is the following. First, EMLC is almost two years old, yet doesn't grab many headlines. Second, the ETF has almost $596 million in AUM and still doesn't get a lot of attention. Third, EMLC yields almost 5.2% and has average daily volume of over 180,000 shares and, you guessed it, doesn't get much press.
Be advised about 18% of EMLC's issues are not investment grade and another almost 19% are not rated at all. Brazil, Poland, South Africa and Mexico each account for 10% of the fund's country weight.
WisdomTree Emerging Markets Corporate Bond Fund (Nasdaq: EMCB) WisdomTree (Nasdaq: WETF), the only publicly traded pure play ETF sponsor, has a tradition of doing a lot of nifty when it comes to offering investors access to yield and emerging markets under the umbrella of one ETF and that tradition continues with the newly minted WisdomTree Emerging Markets Corporate Bond Fund.
Now eight days old, EMCB has almost $45 million in AUM, indicating its first-to-market advantage could be quite strong. That's right. This is the first ETF to offer exposure to emerging markets corporate debt. More than 25% of the ETF's holdings are rated BBB, which is the last investment grade. Another 24% check in at A or AA while non-investment grade or unrated fare make up 31% of EMCB's weight.
Three-quarters of EMCB's sector weight lies with oil, industrial and metal names while Brazil, Russia and Mexico represent about 55% of the new fund's country weight.
It's obviously a small sample size given how new EMCB is, but since the fund's debut, it has outperformed the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE: LQD), the king of corporate bond ETFs.
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