This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Finding Hefty Yields in Emerging Markets Bonds

NEW YORK ( TheStreet) -- Emerging markets bond funds have been rallying. The funds returned 15.0% this year, outdoing the Barclays Capital Aggregate Bond (LAG) index by 11 percentage points, according to Morningstar. Investors have taken notice, pouring $19 billion into the funds this year, a huge inflow for a category with $73 billion total assets.

Can emerging bonds continue to deliver solid returns? Probably. The bonds pay compelling yields. At a time when 10-year Treasuries yield 1.65%, some emerging markets funds yield more than 5.0%. Besides paying rich yields, many countries in Latin America and Asia boast strong balance sheets. That has special appeal in an era when developed countries are plagued with huge debt burdens.

After struggling with financial crises in the 1990s, many emerging countries tightened their belts, reducing budget deficits and paying down debts. As a result, ratings agencies have upgraded many emerging countries, including Brazil, Turkey, and Russia, that were once considered below-investment grade. The upgrades have helped bond prices to rise sharply.

While the emerging markets improved their positions, the U.S. and Europe engaged in a borrowing binge. In response to the undisciplined actions, ratings agencies downgraded many developed countries, including the U.S., France, Ireland, and Austria, that once were considered AAA, the top debt rating.

Despite much talk about reform, debt positions of developed countries have continued deteriorating, says Dave Robbins, portfolio manager of TCW Emerging Markets Income (TGEIX). At the start of the financial crisis in 2008, developed countries had debt levels that were equal to 80% of their gross domestic products. Since then the debt climbed to 110% of GDP. During the same period, the debt figure of developing countries declined from 35% to 34%.

The balance sheets of emerging markets will improve in coming years, Robbins says. With millions of consumers entering the urban middle classes in Asia and Latin America, the emerging economies should continue showing healthy growth and paying down debt. That should help to boost bond prices. The outlook is grimmer for the developed world, Robbins says. "In the next several years, there will be slow growth in the developed world because governments and consumers must repair their balance sheets," he says.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.10 -1.10%
FB $117.59 0.14%
GOOG $697.14 0.69%
TSLA $223.41 -3.80%
YHOO $35.98 -0.08%


Chart of I:DJI
DOW 17,659.34 -91.57 -0.52%
S&P 500 2,048.00 -15.37 -0.74%
NASDAQ 4,718.88 -44.3440 -0.93%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs