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Emerging Markets Bonds Continue To Rally

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provide support, and all sectors of emerging markets debt produced positive returns in September. Emerging Markets Bonds Continue To Rally.

The overwhelming influence of G-3 (U.S., Japan, and Europe) monetary policy has been the dominant theme in emerging markets debt this year, and September was no exception. U.S. interest rate volatility leading up to the Federal Reserve (the “Fed”) meeting impacted hard currency bonds, while local currency sovereign bonds were boosted by stronger currencies and lower local interest rates. Overall, accommodative policies and contained inflation continue to provide support, and all sectors of emerging markets debt produced positive returns in September. Emerging Markets Bonds Continue To Rally.

Rate Volatility and Curve Steepening

Interest rate volatility was a primary concern in September as the market grappled with the possibility that the major developed market central banks might be on the verge of policy shifts. The European Central Bank and the Bank of Japan versions of quantitative easing are both under review and the anticipated impact of reversals or tapers led to steeper curves. In the U.S., the Fed remained on hold, as expected, but took a more hawkish tone with regard to the likelihood of a single hike before yearend. Even so, the scaled back rate expectations of Fed governors in the “dot plot” showed only two potential hikes in 2017.

Emerging Markets Credit Developments

Amid the focus on developed market central bank actions, there were several notable credit stories in emerging markets. After the political events of the summer, Turkey lost its investment grade status following a downgrade by Moody’s Investors Service. Some forced selling of Turkish hard currency sovereign bonds will likely occur due to its removal from investment grade indices at the end of October. Hungary, by contrast, regained investment grade status following an upgrade by Standard & Poor’s (S&P), which may support additional inflows in coming months. Turkish spreads widened while spreads on Hungarian sovereign bonds tightened. We continue to have conviction in higher quality hard currency sovereign bonds, and believe they can offer an attractive yield pickup versus core investment grade fixed income sectors, without excessive risk.

On the corporate side, Petroleos de Venezuela S.A. (PDVSA) was downgraded further into junk territory by S&P following the announcement of a proposed debt swap that could be characterized as a distressed exchange. Although a successful swap would buy time by reducing 2017 maturities, clearly the PDVSA and sovereign bonds continue to price in a very high risk of default with yields ranging between 15% and 50% (annualized for shorter maturity bonds in the latter case). The high current yields on the bonds coupled with a price recovery this year as Venezuela continues to apply band aids to its longer term structural problems, have made the country a top performer in the hard currency space year-to-date. In addition, Brazil’s Petróleo Brasileiro S.A. (Petrobras) announced a new spending plan through 2021 that aims to regain investment grade status by reducing leverage, primarily through an ongoing asset sale program.

The mixed ratings actions, and more generally the mixed data through the month reflect the economic diversity within emerging markets. There were inflation upside and downside surprises in September, and although Mexico hiked rates many emerging markets central banks currently appear to favor further easing. Both Indonesia and Russia cut rates, and Brazil may be poised for rate cuts later this quarter. Overall, the fundamental picture in emerging markets continues to brighten, given that real GDP growth is expected to recover this year to 3.9% and further accelerate in 2017, and current account balances are improving as exports increase.

Strong Local Currency Performance As Rates Remain Steady

Returns in the emerging markets debt space have so far in 2016 ranked commensurately with risk. More specifically, local debt has been the top performer, with a total return of 17.08% YTD after a very strong September (2.02%). Although local sovereigns are lower duration by nearly two years versus U.S. dollar sovereigns, currency risk has tended to be a major factor in volatility and returns (though currency movements explain only about 40% of this year’s return through the end of September). Hard currency corporate debt has actually lagged hard currency sovereign debt, but when one considers the greater than two year duration difference between the asset classes in a year when U.S. Treasury yields have moved significantly lower, the performance difference makes sense. In both the sovereign and corporate hard currency space, high yield has performed significantly better than investment grade.

South Africa, Colombia, and Russia were the top performing countries in the local space, while the Philippines, Mexico, and Malaysia posted negative returns, mostly on currency weakness. In contrast to most emerging markets currencies, the Mexican peso has depreciated 11% against the U.S. dollar. In addition to sluggish economic growth, much of the weakness has been attributed to the upcoming U.S. presidential election and the consequences of a potential Trump presidency. Further volatility is possible over the next month.

Hard currency bonds were impacted by U.S. rate movements in the first half of the month, but generally recovered by month end. Sovereign bonds returned 0.40%, with many of the riskier names outperforming as a result of both spread tightening and a lower duration versus higher quality issuers, which were more impacted by the steepening of the yield curve. The same was true for corporate bonds, which finished September with a small positive return overall (0.18%) while the high yield segment returned 1.14% for the month. Emerging markets high yield bonds yielded 0.51% more than U.S. high yield bonds at the end of September, and provided a pickup of 80 basis points in option-adjusted spread terms. The spread advantage tightened 20 basis fallen angels points during the month, driven largely by an influx of Turkish bank “fallen angels” entering the BofA Merrill Lynch Diversified High Yield US Emerging Markets Corporate Plus Index (EMLH or the “Index”). Although these bonds are tighter than the rest of the overall Index, we believe these bonds are trading at spreads that are attractive for BB rated bonds.

Looking Ahead: December Rate Hike Coming into Focus

As we enter the fourth quarter, given the significant gains in emerging markets debt already achieved this year, one might ask: Where do we go from here? Near term uncertainty will likely come from the approaching U.S. elections, the continued positioning of Organization of Petroleum Exporting Countries (OPEC) members and the resulting impact on oil prices, and the precarious capital positions of some European banks. Most significantly, the prospect of a December rate increase in the U.S. will increasingly come into focus. However with a liquidity backdrop that is still very supportive, yields that remain attractive, and fundamentals that continue to improve, we believe that the investment case for emerging markets debt is not likely to be diminished with the next rate hike.

September 2016 1-Month Total Returns by Country

(Click to enlarge) Source: FactSet as of 9/30/2016. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue.

RELATED FUNDS

VanEck VectorsTM ETFs

CBON
ChinaAMC China Bond ETF

EMAG
Emerging Markets Aggregate Bond ETF

EMLC
J.P. Morgan EM Local Currency Bond ETF

HYEM
Emerging Markets High Yield Bond ETF

IGEM
EM Investment Grade + BB Rated USD Sovereign Bond ETF

IHY
International High Yield Bond ETF

VanEck Funds
EMBAX
Unconstrained Emerging Markets Bond Fund: Class A

Fran Rodilosso    Head of Fixed Income ETF Portfolio Management
Portfolio Manager for Fixed Income ETFs
Oversees the Fixed Income ETF team; responsible for portfolio strategies, as well as credit and market analysis; specializes in international bond markets
Investment Management Team member since 2012
Prior to joining VanEck, Managing Director of Global Emerging Markets with The Seaport Group; launched the firm’s emerging markets fixed income sales and trading business
Previously held portfolio management positions at Greylock Capital and Soundbrook Capital; focused on corporate high-yield and distressed bonds with an emphasis on emerging markets
Earlier career experience includes senior fixed income trading positions at Credit Lyonnais and HSBC
Quoted in Financial Times, Barron’s, and ETF Trends, among others
CFA charterholder; member of New York Society of Security Analysts
MBA (with distinction), Finance, The Wharton School of Business, University of Pennsylvania; AB, History, Princeton University

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AXQE ETF för den som tror på emerging markets men inte Kina

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AXA IM MSCI Emerging Markets ex-China Equity PAB UCITS ETF EUR Hedged Acc (AXQE ETF) med ISIN IE000Y65F5C2, försöker följa MSCI Emerging Markets ex China Climate Paris Aligned (EUR Hedged) index. MSCI Emerging Markets ex China Climate Paris Aligned (EUR Hedged)-index spårar aktier från tillväxtmarknadsländer (exklusive Kina). Indexet syftar till att ge större vikt till företag som gynnas av omställningen till en ekonomi med lägre koldioxidutsläpp. Dessutom beaktas EU:s direktiv om klimatskydd. Moderindexet är MSCI Emerging Markets ex China. Valuta säkrad till euro (EUR).

AXA IM MSCI Emerging Markets ex-China Equity PAB UCITS ETF EUR Hedged Acc (AXQE ETF) med ISIN IE000Y65F5C2, försöker följa MSCI Emerging Markets ex China Climate Paris Aligned (EUR Hedged) index. MSCI Emerging Markets ex China Climate Paris Aligned (EUR Hedged)-index spårar aktier från tillväxtmarknadsländer (exklusive Kina). Indexet syftar till att ge större vikt till företag som gynnas av omställningen till en ekonomi med lägre koldioxidutsläpp. Dessutom beaktas EUs direktiv om klimatskydd. Moderindexet är MSCI Emerging Markets ex China. Valutasäkrad till euro (EUR).

Den börshandlade fondens TER (total cost ratio) uppgår till 0,30 % p.a. AXA IM MSCI Emerging Markets ex-China Equity PAB UCITS ETF EUR Hedged Acc är den enda ETF som följer MSCI Emerging Markets ex China Climate Paris Aligned (EUR Hedged) index. ETFen replikerar det underliggande indexets prestanda genom full replikering (köper alla indexbeståndsdelar). Utdelningarna i ETFen ackumuleras och återinvesteras.

AXA IM MSCI Emerging Markets ex-China Equity PAB UCITS ETF EUR Hedged Acc är en mycket liten ETF med tillgångar på 0 miljoner euro under förvaltning. Denna ETF lanserades den 11 februari 2025 och har sin hemvist i Irland.

Investeringsmål

Att försöka förse investerare med resultatet av MSCI EM ex China Climate Paris Aligned Index (indexet), minus fondens avgifter och utgifter, samtidigt som man strävar efter att minimera tracking error mellan fondens nettotillgångsvärde och index.

Handla AXQE ETF

AXA IM MSCI Emerging Markets ex-China Equity PAB UCITS ETF EUR Hedged Acc (AXQE ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel  Nordnet, SAVR, DEGIRO och Avanza.

Börsnoteringar

BörsValutaKortnamn
XETRAEURAXQE
gettexEURAXQE

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iShares € Corp Bond Enhanced Active UCITS ETF börjar handlas på Xetra och Frankfurtbörsen

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iShares € Corp Bond Enhanced Active UCITS ETF förvaltas aktivt och investerar främst i euro-denominerade räntebärande värdepapper med investeringsgrad från utvecklade marknadsföretag. Upp till 20 procent av tillgångarna kan placeras i obligationer från tillväxtmarknader.

iShares € Corp Bond Enhanced Active UCITS ETF förvaltas aktivt och investerar främst i euro-denominerade räntebärande värdepapper med investeringsgrad från utvecklade marknadsföretag. Upp till 20 procent av tillgångarna kan placeras i obligationer från tillväxtmarknader.

NamnISIN
kortnamn
AvgiftUtdelnings-
policy
iShares € Corp Bond Enhanced Active UCITS ETF EUR (Acc)IE000BUIVY49
EUEB (EUR)
0,20%Ackumulerande

Produktutbudet inom Deutsche Börses ETF & ETP-segment omfattar för närvarande totalt 2 398 ETFer, 198 ETCer och 255 ETNer. Med detta urval och en genomsnittlig månatlig handelsvolym på mer än €21 miljarder är Xetra den ledande handelsplatsen för ETFer och ETPer i Europa.

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Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis

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Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis Bitcoin price technical analysis: Where are the liquidation levels?
  • Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
  • Bitcoin price technical analysis: Where are the liquidation levels?
  • What are real-world assets and why do we need tokenization?

Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis

Strategy (formerly MicroStrategy) has amassed a staggering $43 billion in Bitcoin, positioning itself at the forefront of the corporate “reserve race.” Under the leadership of Bitcoin maximalist Michael Saylor, the company now boasts an $84 billion market cap. But with such an aggressive strategy, how sustainable is its approach—and what risks lie ahead? We break it down in today’s analysis.

Bitcoin price technical analysis: Where are the liquidation levels?

A drop below $72,000 could flush longs, while a breakout above $90,000 may squeeze shorts. One key positive indicator is that Bitcoin continues to print higher lows since March 10, which preserves a bullish market structure in our view. Dive into our technical analysis.

What are real-world assets and why do we need tokenization?

Imagine owning a slice of a skyscraper or a piece of fine art with just a few clicks. Tokenization, the act of converting ownership rights to real-world assets (RWAs) into tradable tokens, has surpassed $10 billion in on-chain value, unlocking global 24/7 access to once-exclusive markets with liquidity, efficiency, and yield. Find out how it works.

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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