FYI: The global scramble for yield will continue for “some time.” That was the prediction from Federal Reserve Chairman Jay Powell Wednesday, indicating when the central bank is likely to hike U.S. rates again. Yields on 10-year Treasury notes fell to a 14-month low around 2.6% on his remarks.
In contrast, 10-year government paper paying nearly 9% from Brazil, 7.6% from Indonesia, or 14%-plus from Nigeria sounds alluring, assuming the dollar and Fed both stays on hold. “With the dollar no longer a headwind, you’re looking at a pretty benign environment for these credits,” says Edwin Gutierrez, head of emerging market sovereign debt at Aberdeen Asset Management.
The catch is that these outsize returns are paid in local currency. Translated into greenbacks, that wiped out all their yield and more last year. Investors in the VanEck Vectors J.P. Morgan EM Local Currency Bond exchange-traded funded (ticker: EMLC) lost more than 7% in 2018.
Regards,
Ted
https://www.barrons.com/articles/emerging-market-bonds-look-like-a-good-bet-for-income-investors-51553265354?refsec=bonds
