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We expect EMFX to be the dominant driver of returns for the remainder of the year, and although further volatility is expected, we believe there is a strategic case for an EMFX recovery.
Emerging markets corporate high yield bond spreads continue to stand out following the March-April selloff, while the yield pickup compared to U.S. high yield corporate bonds remains wide.
At current valuations, we expect that emerging markets local currency bond returns will primarily be driven by currencies for the remainder of the year.
A comparison between different segments of the global high yield market reveals where investors may find attractive opportunities for yield: in emerging markets.
Along with its attractive spreads, we believe continued global growth and accommodative monetary policy may create opportunities in high yield emerging markets corporate bonds.