Insights on Accessing Local Bonds in Emerging Markets
January 31, 2023
Read Time 1 MIN
As we have noted in previous blogs, compared to the U.S. and other developed markets bonds, emerging markets local currency bonds provide significantly higher nominal and real yields with lower duration, on average. Emerging markets bonds also historically do well in rising rate environments—particularly when rates rise due to higher global growth prospects. For a variety of reasons, including rate differentials, the potential end of tightening cycles, a re-acceleration of EM growth led by China, and a possible negative turn for the U.S. dollar, we believe EM bonds should be an area of focus in 2023.
A recent case study produced by the electronic trading platform MarketAxess discusses how VanEck and the platform have grown together in terms of providing access to a variety of local markets, including most recently the Chinese onshore bond market. The case study also highlights the role technology can play when accessing emerging markets, offering potential benefits such as:
- Efficiency: When trading a list across the curve, by receiving multiple quotes, even if it’s just for one or two-line items that are close to what is desired, it’s possible to make comparisons and ensure pricing is correct.
- Reliability: Confidence that the system will mitigate post-trade problems and easily resolve any issues that do occur.
- Transparency: From pricing to market depth and data, the right technology provides a level of transparency that is essential for growth.
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IMPORTANT DISCLOSURES
Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.
By clicking on the link to a non-VanEck case study, you acknowledge that you are leaving VanEck’s website and acknowledge that you are viewing third party content subject to its own terms and conditions. VanEck disclaims responsibility for content, legality of access or suitability of the third party case study. VanEck provides links to third party content only as a convenience and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked content. All persons accessing this link do so on their own initiative and are responsible for compliance with applicable local laws and regulations.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. 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. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this communication and are subject to change without notice. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
Investments in emerging markets bonds may be substantially more volatile, and substantially less liquid, than the bonds of governments, government agencies, and government-owned corporations located in more developed foreign markets. Emerging markets bonds can have greater custodial and operational risks, and less developed legal and accounting systems than developed markets. 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 performance.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
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IMPORTANT DISCLOSURES
Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.
By clicking on the link to a non-VanEck case study, you acknowledge that you are leaving VanEck’s website and acknowledge that you are viewing third party content subject to its own terms and conditions. VanEck disclaims responsibility for content, legality of access or suitability of the third party case study. VanEck provides links to third party content only as a convenience and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked content. All persons accessing this link do so on their own initiative and are responsible for compliance with applicable local laws and regulations.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. 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. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this communication and are subject to change without notice. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
Investments in emerging markets bonds may be substantially more volatile, and substantially less liquid, than the bonds of governments, government agencies, and government-owned corporations located in more developed foreign markets. Emerging markets bonds can have greater custodial and operational risks, and less developed legal and accounting systems than developed markets. 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 performance.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.