Emerging Market Bonds Become Important Parts of Many Portfolios
05/04/2011 0 comments
Emerging market bonds have become a large part of many investors' portfolios in recent years. This can be attributed to an increase in the credit quality of the bonds of foreign countries and companies. These bonds generally offer higher yields than T reasury bonds and domestic corporate bonds. ETFs that track this market allow investors to diversify across many international regions and across countries of various size and economic strength.
Recently, Emerging Market Bond ETFs have performed well when compared to other Fixed Income Assets. With a trend score of 2.21%, Emerging Market Bond ETFs, represented by PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) have shown improvement in recent periods. This can be attributed to the continued growth and economic strengthening of many developing nations along with the desire by many investors to move money away from developed nations that have encountered economic trouble.
Fixed Income Return Table
4/29/2011
| Assets Class | Symbols | 04/29 Trend Score | 04/21 Trend Score | Direction |
|---|---|---|---|---|
| International Inflation Protected | WIP | 9.22% | 7.53% | ^ |
| International Treasury | BWX | 6.82% | 4.91% | ^ |
| High Yield | JNK | 5.68% | 5.88% | v |
| Inflation Protected | TIP | 3.27% | 2.89% | ^ |
| Long Term Credit | LQD | 2.87% | 2.43% | ^ |
| Emerging Mkt Bonds | PCY | 2.21% | 1.52% | ^ |
| Intermediate Term Credit | CIU | 2.06% | 1.74% | ^ |
| California Muni | CMF | 1.99% | 0.42% | ^ |
| MBS Bond | MBB | 1.83% | 1.32% | ^ |
| US Total Bond | BND | 1.77% | 1.39% | ^ |
| 10-20Year Treasury | TLH | 1.73% | 1.02% | ^ |
| Intermediate Treasury | IEF | 1.65% | 1.06% | ^ |
| 20+ Year Treasury | TLT | 1.63% | 1.12% | ^ |
| National Muni | MUB | 1.24% | 0.84% | ^ |
| Short Term Credit | CSJ | 1.09% | 0.89% | ^ |
| Short Term Treasury | SHY | 0.53% | 0.46% | ^ |
| New York Muni | NYF | 0.51% | 0.06% | ^ |
| Treasury Bills | SHV | 0.07% | 0.09% | v |
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
In the past year, ETFs tracking Emerging Market Bonds have offered investors strong performance, slightly above historical levels. EMB iShares JPMorgan USD Emerging Markets ETF (EMB) lead within the sector, growing 9.3% in the past year. Over the past three years EMB has returned 7.44%. Another strong performer in Emerging Market Bond ETFs has been PCY PowerShares Emerging Markets (PCY), gaining 8.7% in the past year, slightly above its three year growth of 8.32%.
Emerging Market Bonds
4/29/2011
| Description | Symbol | 1 Year | 3 Years |
| EMB iShares JPMorgan USD Emerg Mkt | EMB | 9.3% | 7.44% |
| PCY PowerShares Emerging Mkts | PCY | 8.7% | 8.32% |
As developing economies continue to improve, Emerging Market Bond ETFs will remain an important part of a well-diversified portfolio. With developed nations like the United States, Japan, and certain European countries experiencing economic instability, market participants will likely continue moving towards emerging market assets like Bond ETFs.
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Tickers: (NYSE: PCY), (NYSEArca: EMB), (NYSE: PCY), (NYSE: EMB), (NYSE: WIP), (NYSE: BWX), (NYSE: JNK), (NYSE: TIP), (NYSE:LQD), (NYSE:.PCY), (NYSE: CIU), (NYSE: CMF), (NYSE: MBB), (NYSE: BND), (NYSE: TLH), (NYSE: IEF), (NYSE: TLT), (NYSE: MUB), (NYSE: CSJ), (NYSE: SHY), (NYSE: NYF), (NYSE: SHV)
Symbols: PCY, EMB, WIP, BWX, JNK, TIP, LQD, PCY, CIU, CMF, MBB, BND, TLH, IEF, TLT, MUB, CSJ, SHY, NYF, SHV
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