60 seconds with Rajeev De Mello on the yields in EM
While so much of the bond market offers negative yields, emerging market debt is growing in attraction.
02 Aug 2016
Unstructured Learning Time
There is currently an unusual situation in which approximately $13 trillion worth of bonds have negative yields.
For all investors in bonds, be they institutional or retail, this is an incredibly difficult problem to solve. Not only are investors getting nothing in terms of yield from their bonds, but they actually have to pay some kind of return to own any bonds.
We think that emerging market bonds offer some type of solution to this problem - they generally have significantly higher yields than the bonds from developed markets.
We are also seeing their yield levels coming down, which means the value of the bonds rise, providing investors with capital appreciation.
For investors who are thinking about the long term, it is important to lock in some kind of yield – they’ll need it for their spending requirements. Finding a basket or combination of bonds which gives investors a high yield over a sustained period is critical.
Considering the pick-up in yield that emerging markets offer compared to the developed world, it is an area worth considering for investors.