![]() The more than 22% drawdown since the middle of September 2021 1 already exceeds the worst drop in 2020 and is within 5% of the peak drawdown in 2008.Įmerging markets debt is further along in its adjustment. For comparison, this yield just touched 8% during the peak of the COVID liquidity crisis in March of 2020, and the last time we saw these levels was in the aftermath of the global financial crisis. Morgan Emerging Markets Global Bond Index Diversified yield stood at 8.57%. Government revenues have been strong, but higher imported inflation is increasing costs for domestic borrowing as costs for external borrowing have risen.įinancial markets have already factored current fundamental risks into prices. Many emerging markets issuers will continue to benefit from higher commodity prices, but some are exposed to higher import costs for food and fuel. The specific case for emerging markets debt comes down to valuations and improving technical factors, while fundamentals are mixed. Once a recovery is in place, returns from emerging markets debt can be very significant as longer bond maturities can sustain price appreciation and countries strive to improve their credit fundamentals. In fact, recovery rates after default are often higher than for corporate issuers because countries do not simply disappear as a company may. ![]() This certainly does not make emerging markets investments risk-free, and defaults do happen, but the incentive to pay the debt is very high. They also can fund domestically and raise additional revenues through taxes. Emerging markets countries have access to pools of financing from multilateral and bilateral lenders not available to private issuers. Sovereign resilienceĪnother strength of this asset class is the resilience of sovereign issuers. A more diversified issuer base translates into less idiosyncratic risk and more active management opportunities. The category includes low-income countries from sub-Saharan Africa and wealthy oil exporters from the Persian Gulf. Comparison evaluated on annualized total return of the Emerging Markets Debt Funds Average.Įmerging markets debt is significantly more diversified than it has ever been, with numerous new issuers from both sides of the credit spectrum. Note: Only funds with year-to-date and a minimum one-, three-, and five-year history were included in the comparison. * For the year-to-date period, VEMBX outperformed 112 of 242 Emerging Markets Debt Funds for the one-year period, VEMBX outperformed 135 of 241 Emerging Markets Debt Funds for the three-year period, VEMBX outperformed 214 of 224 Emerging Markets Debt Funds and for the five-year period, VEMBX outperformed 201 of 202 Emerging Markets Debt Funds results will vary for other time periods. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. For the most recent performance, visit our website at /performance. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. ![]() Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. Return of JP Morgan Emerging Markets Bond Index Global Diversified Benchmark Vanguard Emerging Markets Bond Fund Investor Shares (VEMBX) return Percentage of peer-group funds VEMBX has outperformed*
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