EM High Yield Corporates: Superior Yields, Low Defaults
December 04, 2025
Read Time 2 MIN
Key Takeaways
- Strong Momentum: EM high yield corporates have extended their outperformance in 2025, supported by improving fundamentals.
- Compelling Yields: The segment provides one of the most appealing income opportunities in fixed income, offering strong carry and attractive compensation for risk.
- Attractive Risk Profile: Despite perceptions, EM high yield issuers now exhibit higher average credit quality, lower defaults, and lower leverage than US peers.
Emerging market high yield corporate bonds continued their momentum in 2025, outpacing US and major global credit benchmarks after a robust gain of approximately 13% in 2024. Over the past 15 years, this EM debt segment has more than doubled in size, evolving into a broader and deeper market. Today, the asset class benefits from improving fundamentals, higher credit quality and lower default rates than US high yield, while offering a substantial yield cushion.
Mind the Yield
EM high yield corporates continue to offer some of the most attractive yields in the fixed income space. The income portion of the return has been the dominant driver of performance, providing steady carry that cushions volatility and smooths drawdowns through market swings. This dynamic, where carry leads the way over larger price gains, can deliver consistent returns without relying on further spread tightening.
Source: Morningstar. Data as of October 2025. Please see below for indices that represent each category. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index. Past performance is no guarantee of future results.
HYEM | VanEck Emerging Markets High Yield Bond ETF
Attractive Compensation for Risk
EM high yield corporate bonds are often perceived as riskier than those in the US and other developed markets, yet they exhibit higher credit quality, lower defaults and superior compensation for risk. The EM high yield index tilts more toward higher quality, with approximately 62% rated BB versus 55% in US high yield. Default rates spiked post‐COVID in 2022‐2023 following China’s property sector collapse and Russian sanctions but have since normalized to levels below US high yield. Further, EM high yield corporate issuers often display wider spreads and lower leverage than US high yield, offering a relatively more favorable risk/reward profile.
Lower Leverage than US HY
Source: Bank of America. Data as of December 2024.
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The EM high yield corporate debt market has matured into a larger, more diversified market that presents an attractive opportunity for income investors: higher yields and improved credit quality relative to US high yield.
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Important Disclosures
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
USD EM Bonds are represented by the J.P. Morgan EMBI Global Diversified Index. EM High Yield is represented by the BofA Diversified High Yield US Emerging Markets Corporate Plus Index. US High Yield is represented by the ICE BofA US High Yield Index. Local Currency EM Sovereign is represented by the J.P. Morgan GBI-EM Global Diversified Index. US IG is represented by the ICA BofA US Corporate Index. US Broad Market is represented by the ICE BofA US Broad Index. Global Broad Market is represented by the ICE BofA Global Broad Index. Developed Markets is represented by the ICE BofA Developed Markets Sovereign Index.
There are inherent risks with fixed income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer duration fixed-income securities and during periods when prevailing interest rates are low or negative.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
© Van Eck Associates Corporation
666 Third Avenue | New York, NY 10017
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Important Disclosures
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
USD EM Bonds are represented by the J.P. Morgan EMBI Global Diversified Index. EM High Yield is represented by the BofA Diversified High Yield US Emerging Markets Corporate Plus Index. US High Yield is represented by the ICE BofA US High Yield Index. Local Currency EM Sovereign is represented by the J.P. Morgan GBI-EM Global Diversified Index. US IG is represented by the ICA BofA US Corporate Index. US Broad Market is represented by the ICE BofA US Broad Index. Global Broad Market is represented by the ICE BofA Global Broad Index. Developed Markets is represented by the ICE BofA Developed Markets Sovereign Index.
There are inherent risks with fixed income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer duration fixed-income securities and during periods when prevailing interest rates are low or negative.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
© Van Eck Associates Corporation
666 Third Avenue | New York, NY 10017