ETFs to Capture the Higher Yields of Asian Bonds

Emerging market bonds offer more attractive income levels than fixed income in the US or UK. And Asian bond markets are less oil dependent than those in Russia and Brazil

Jose Garcia Zarate 27 November, 2015 | 9:31AM

This article is part of Morningstar’s Guide to Investing in Asia where we navigate the potential risks for the chance of fantastic rewards from across the region.

Why invest in emerging market bonds? The most obvious lure lies in the comparatively higher yields on offer relative to their domestic markets. Even accounting for interest rates rising in the US – to be followed by the UK at some stage – the overall bond market environment remains characterised by very low yields across the maturity spectrum. This is particularly obvious in the eurozone, where it is widely expected there will be a further upping of accommodative monetary policy settings into 2016.

Seen from this simple perspective, investing in emerging markets bond markets may look something of a no-brainer for the yield-hungry. However, increasingly, investors are becoming aware of the need to discriminate between individual emerging markets countries. Indeed, within this heterogeneous group of countries, the ones suffering particularly badly are those with economic models underpinned on their commodity export potential – think Russia, or to some extent Brazil.

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About Author

Jose Garcia Zarate

Jose Garcia Zarate  is Associate Director of Passive Strategies Research for Morningstar Europe

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