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Friday September 03, 2010
Emerging market bond ETF: Best asset class?
by Nicholas Vardy, editor Global Bull Market Alert  Our latest pick focuses on a new asset class -- sovereign or government debt -- through the iShares JPMorgan USD Emerging Markets Bond (EMB).Emerging market bonds have taken off in 2010 and are poised to be one of the best-performing asset classes of the year. While yields on U.S. Treasuries are plummeting, emerging markets bonds are becoming ever more attractive. In today's topsy-turvy world, many emerging markets actually have better balance sheets and are more capable of repaying debts than some of their more heavily indebted counterparts in the developed world. 
A handful of sovereign emerging market bonds pay coupons in excess of 10% (in U.S. dollars), compared to 4% and under for many government bond ETFs. JPMorgan's latest investor survey appears to confirm newfound interest in emerging market bonds. They expect already record inflows to emerging market debt to pick up further to a total of $70-$75 billion in 2010. The iShares JPMorgan USD Emerging Markets Bond follows the JPMorgan EMBI Global Core Index, a benchmark designed to track the total return of a U.S. dollar-denominated emerging markets debt benchmark. EMB holds 57 different securities, and the average credit rating of its securities is BBB- at the edge of investment grade. EMB’s yield is about 5.7% and it is up 12.97% so far this year -- outperforming all but the top-performing global stock markets of 2010. EMB also serves as a defensive position in your portfolio that will act as a relatively low volatility hedge against sharp downturns in global stock markets. So buy the iShares JPMorgan USD Emerging Markets Bond at market, and place your stop at $109.25. Learn more about this financial newsletter at Nicholas Vardy's Global Bull Market Alert. |
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