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  • Emerging Markets Bonds

    High Yield Shines Among EM Corporate Bonds

    Fran Rodilosso, Head of Fixed Income ETF Portfolio Management, CFA
    June 17, 2019

    Relative to the U.S., emerging markets corporate bond markets are exhibiting healthier and improving credit metrics. This is illustrated by the dramatic decline in net leverage over the past three years, compared to U.S. levels that have not shown the same improvement.

    Emerging Markets vs U.S. Net Leverage

    Emering Markets vs U.S. Net Leverage

    Source: Bank of America Merrill Lynch. Data as of May 2019.

    This decline has been driven by lower debt levels and higher revenue growth, particularly in the high yield segment of the market. High yield total debt has declined 5% versus one year ago, with Latin America and EMEA posting the highest declines.Total debt among Asian high yield issuers showed a small increase of 3% and EBITDA growth among those issuers in 2018 was the strongest versus other regions, although all regions posted increases.2

    For emerging markets high yield bond investors, the ultimate question is whether there is adequate compensation for the risk being taken, both on an absolute basis and relative to other asset classes. The recent widening in credit spreads in conjunction with improved fundamentals has resulted in what we believe is a potentially attractive risk/reward tradeoff in emerging markets high yield corporate bonds.

    Spread per Turn of Net Leverage

    Spread per Turn of Net Leverage

    Source: Bank of America Merrill Lynch. Data as of May 2019.


    1Source: Bank of America Merrill Lynch.

    2Source: Bank of America Merrill Lynch.

    Please note that Van Eck Associates Corporation serves as investment advisor to investment products that invest in the asset class(es) included in this commentary.

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    The information herein represents the opinion of the author(s), but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. 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. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only.

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  • Authored by

    Fran Rodilosso
    Head of Fixed Income ETF Portfolio Management, CFA

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