Yield in Focus: Rethinking Risk in Emerging Market Bonds
January 15, 2026
Watch Time 3:35 MIN
Learn how investors can approach income opportunities in emerging market bonds as the risk narrative continues to evolve. Discover why fundamentals, valuation, and credit quality play a critical role when assessing yield potential, and how emerging markets may offer differentiated sources of income in today’s global bond landscape.
See how VanEck’s emerging market bond ETFs, like EMBX, EMLC, and HYEM, provide access to opportunities across sovereign and corporate debt, while maintaining a disciplined approach to credit risk and portfolio construction.
EM bonds can diversify a US-centric bond portfolio and provide higher yields. We believe developed market bond yields right now are not adequately compensating investors for growing long-term risk, making EM particularly attractive right now because of the better fundamentals and higher yields.
The EM Risk Story Is Changing
Many equate EM with high risk, and for sure, investing in EM does introduce unique risks into a portfolio. However, this perception overlooks that across EMs over the past few decades, responsible policies and reforms have been implemented and a large and liquid debt market has evolved. At the same time, developed market risks have increased and we now see high debt and increased policy and political ineffectiveness. Emerging markets, on the other hand, have low debt and controlled inflation and stand to benefit from many of the geopolitical shifts that we see today.
EMBX |VanEck Emerging Markets Bond ETF
VanEck offers a suite of EM bond ETFs, allowing investors to capture opportunities within the asset class, including higher yield potential.
The VanEck Emerging Markets Bond ETF, or EMBX, invests across the entire universe of EM debt, sovereign and corporate bonds in both hard and local currencies. It's managed by an experienced team with a proven track record that goes back to 2012, and they apply a consistent and disciplined approach across the entire investment universe to find the best opportunities.
EMLC |VanEck JP Morgan EM Local Currency Bond ETF
VanEck also provides solutions for investors who are looking for more targeted opportunities within the asset class. The VanEck JP Morgan EM Local Currency Bond ETF, or EMLC, focuses on sovereign bonds issued in local currencies. With continued deficits and sticky inflation in developed markets, we think EM local currency can continue to outperform.
This is due to both better fundamentals and higher yields. The asset class has provided a 335 basis point yield pickup versus 10-year U.S. Treasuries and a 435 basis point pickup versus broad developed market sovereign bonds on average over the past decade.
And the asset class provides the potential to benefit from currency appreciation. EM FX can add or detract to returns in a given year. But local rates have actually been the main driver of positive returns. So, EM local currency bonds are not just a play on currency, they're also a yield enhancer within a global bond portfolio.
HYEM |VanEck High Yield Emerging Markets Bond ETF
Lastly, the VanEck High Yield Emerging Markets Bond ETF, or HYEM, focuses on dollar-denominated high-yield emerging market corporate bonds.
The EM corporate bond market has broadened and deepened over the last few decades. And we believe the asset class offers a compelling complement or alternative to US high yield.
EM high yield corporate bonds have provided a pickup of 130 basis points in yield over US high yield corporates over the past decade with a greater tilt towards higher rated bonds. This has allowed investors to earn more yield with less credit risk. And given the tight spreads we now see in US credit, we believe high yield emerging market corporates may be an attractive area for yield focused investors to take a look at.
IMPORTANT DISCLOSURES
Performance as of January 2026. Source: J.P. Morgan, ICE. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index.
EM Local Bonds: The J.P. Morgan GBI-EM Global Diversified tracks local currency bonds issued by Emerging Markets governments.
Treasuries: ICE BofA Current 10-Year U.S. Treasury Index is comprised of the most recently issued 10-year U.S. Treasury note
Developed Markets: ICE BofA Developed Markets Sovereign Bond Index is a subset of ICE BofA World Sovereign Bond Index including all securities with a country of risk that is a member of the FX G10, all Western European countries, and territories of the U. S. and Western European countries.EM HY Corporate Bonds: ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index tracks the performance of US dollar denominated below investment grade emerging markets non-sovereign debt publicly issued in the major domestic and eurobond markets.
US HY Corporates: ICE BofA US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued and settled in the US domestic market.
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.
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.
An investment in the VanEck Emerging Markets Bond ETF (EMBX) may be subject to risks which include, among others, risks related to active management, credit, credit-linked notes, currency management strategies, derivatives, emerging market issuers, ESG investing, foreign currency, foreign securities, hedging, high portfolio turnover, high yield securities, interest rate, market, non-diversified, operational, restricted securities, investing in other funds, sovereign bond, special risk considerations of investing in African, Asian, and Latin American issuers, authorized participant concentration, no guarantee of active trading market, trading issues, fund shares trading, premium/discount and liquidity of fund shares, and cash transactions risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks. Index information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy.
The Index is used with permission. The index may not be copied, used or distributed without J.P. Morgan’s written approval. Copyright 2025, J.P. Morgan Chase & Co. All rights reserved.
On October 6th, 2025, the Fund converted from an open‑end mutual fund into an exchange‑traded fund (“ETF”). As part of the conversion, the Fund adopted the accounting and performance history of its predecessor mutual fund (the “Predecessor Fund”). Performance shown for periods prior to October 6th, 2025 reflects the NAV performance of the Predecessor Fund’s institutional share class ("Class I") and not the ETF’s market‑price performance. If the Predecessor Fund had been structured as an ETF, its performance may have differed (for example, due to brokerage commissions, bid‑ask spreads, and premiums/discounts to NAV). Effective October 6th, 2025, the Fund’s total annual operating expenses changed; returns for periods prior to that date reflect the Predecessor Fund’s expenses then in effect.
An investment in the VanEck J.P. Morgan Emerging Markets Local Currency Bond ETF (EMLC) may be subject to risks which include, among others, foreign securities, emerging market issuers, foreign currency, special risk considerations of investing in European, Asian, and Latin American issuers, credit, interest rate, high yield securities, sovereign bond, cash transactions, market, operational, sampling, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, issuer-specific changes, non-diversified, and index-related concentration risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks.
VanEck J.P. Morgan Emerging Markets Local Currency Bond ETF (EMLC) is not sponsored, endorsed, sold or promoted by J.P. Morgan and J.P. Morgan makes no representation regarding the advisability of investing in EMLC. J.P. Morgan does not warrant the completeness or accuracy of the J.P. Morgan GBI-EM Global Core Index. "J.P. Morgan" is a registered service mark of JPMorgan Chase & Co. © 2019. JPMorgan Chase & Co. All rights reserved.
An investment in the VanEck High Yield Emerging Markets Bond ETF (HYEM) may be subject to risks which include, among others, high yield securities, special risk considerations of investing in European, Asian, and Latin American issuers, foreign securities, emerging market issuers, foreign currency, credit, interest rate, restricted securities, financials sector, energy sector, basic materials sector, market, operational, call, sampling, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, and index-related concentration risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
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