Zacks.com Director of ETF Research highlights: Emerging Markets Sovereign Bond ETFs- Safe With Attractive Yields

CHICAGO, July 23, 2012 /PRNewswire/ -- Stocks and funds in this article include: WisdomTree Emerging Markets Local Debt Fund (ELD), Market Vectors EM Local Currency Bond ETF (EMLC), SPDR Barclays Capital Emerging Markets Local Bond ETF (EBND), iShares Emerging Markets Local Currency Bond Fund (LEMB)

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Emerging Markets Sovereign Bond ETFs: Safe With Attractive Yields, written by Neena Mishra, CFA of Zacks Investment Research:  

With the U.S. Treasury bonds now at ultra-low yield levels, the investors are looking at alternate sources of income from their investment portfolios. One asset class which has attracted a lot of investors' interest recently is emerging markets debt, as it provides an opportunity to earn much higher yields with capital appreciation, while adding diversification benefits to the portfolio.

The case of investing in emerging markets sovereign debt seems to be pretty strong now. Many emerging countries now have better fiscal health and lower debt levels than their developed counterparts. Healthy emerging economies also have adequate levels of foreign exchange reserves and deep and liquid financial markets. Thus the chances of sovereign default are extremely low.

Further, while interest rates are at rock-bottom levels in the U.S. and can only go up from the current levels, the rates in emerging countries are still high. The central banks in many of these countries were raising rates till last year but reversed the monetary cycle later last year or earlier this year, as the growth slowed and inflation came within their acceptable range.

Investors looking for true diversification in their portfolios and higher longer-term return should consider investing in emerging markets local currency bond ETFs.

In addition to greater return potential in the long-term, these ETFs are less sensitive to interest rate changes compared with USD denominated debt ETFs due to their shorter duration (4-5 years) compared with the duration of two USD denominated emerging market debt ETFs (7-9 years).

WisdomTree Emerging Markets Local Debt Fund (ELD)

The fund has more than $1.2 billion in AUM as of now. Current SEC yield is 4.27% while the expense ratio is 55 basis points per annum. Mexico (10.6%), Indonesia (10.3%), Malaysia (10.2%) and Brazil (10.0%) are the top countries in terms of exposure.

Market Vectors EM Local Currency Bond ETF (EMLC)

The fund holds 184 securities, with an average modified duration of 5.0 years and average years to maturity of 7.5 years. The ETF charges expense ratio of 49 basis points, while the 30 day SEC yield is 5.4% currently. EMLC has returned 8.6% year-to-date.

SPDR Barclays Capital Emerging Markets Local Bond ETF (EBND)

EBND tracks Barclays Capital EM Local Currency Government Diversified Index, which is designed to measure the performance of fixed rate local currency sovereign debt of emerging market countries, having remaining maturity of one year or more and rated B- or higher. Average maturity of its 234 holdings is 6.6 years, while the modified adjusted duration is 4.8 years.

iShares Emerging Markets Local Currency Bond Fund (LEMB)

LEMB tracks the Barclays Emerging Markets Broad Local Currency Bond Index, which is designed to track emerging market sovereign debt, issued in local currencies. The fund which made its debut in October 2011 has attracted AUM $50.5 million so far, invested in 47 holdings. The expense ratio is 60 basis points while the 30 days SEC yield is 4.62% currently.

For the rest of this ETF article, please visit Zacks.com at: http://www.zacks.com/stock/news/79174/emerging-markets-sovereign-bond-etfs-safe-with-attractive-yields

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

About Zacks Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros http://at.zacks.com/?id=113

Follow Zacks on Twitter:  http://twitter.com/ZacksResearch

Join Zacks on Facebook:  http://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact: Neena Mishra
Company: Zacks.com
Phone: 312-265-9289
Email: [email protected]
Visit: www.Zacks.com

SOURCE Zacks Investment Research, Inc.