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EM Corporate Bonds: Where income still flows

Wednesday, August 09, 2017

EM Corporate Bonds: Where income still flows

Emerging market corporate bonds are a beacon for investors struggling to find sufficient income. Not only do they offer the sort of yields that have all but disappeared elsewhere, but they’re underpinned by solid economic  fundamentals. And because these bonds mature sooner on average than their sovereign emerging market counterparts, they’re better placed to weather rising global interest rates.

In a world starved of income, emerging market (EM) corporate bonds are coming into their own. Yields are some of the highest available among the major fixed income asset classes. In fact, they’re only surpassed by those on EM local currency debt and US high yield credit.

This makes EM corporate particularly attractive given how abnormally compressed spreads have become across much of the rest of the fixed income universe – and the huge volume of negative yielding developed government and top-rated European corporate debt.

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