VanEck J.P. Morgan EM Local Currency Bond ETF (EMLC)
A Surprising Way to Get More Yield (And Less Volatility) Than Treasury Bonds
Here is a thesis that flips the bond world on its head: the volatility everyone fears in emerging markets has migrated to developed markets, while the yield premium for owning EM debt has stayed put.
This High-Yield ETF Combines Bond Investing With Emerging Market Currencies
Most US investors hold bonds priced in dollars, which means their fixed-income returns rise and fall almost entirely on what the Federal Reserve does next.
Monthly dividend ETF posts 13% return while Wall Street questions long-term sustainability of currency risk
VanEck J.P. Morgan EM Local Currency Bond ETF (NYSEARCA:EMLC | EMLC Price Prediction) pays a monthly distribution that currently translates to a trailing yield near 6.1%, a level that sits above the 10-year Treasury at 4.3%, and the Fed funds upper bound has been held at 3.75% since December.
EMLC Paid Dividends for 16 Years, but Short Interest Surged 73%
VanEck J.P. Morgan EM Local Currency Bond ETF (NYSEARCA:EMLC) offers a 6.09% yield that draws income-focused investors, particularly retirees hunting for yield above what U.S. Treasuries provide. But the headline number obscures a more complicated picture involving currency risk, capital erosion, and rising institutional skepticism. How EMLC Generates Its Income EMLC holds bonds issued by... EMLC Paid Dividends for 16 Years, but Short Interest Surged 73%
EMLC Paid Dividends for 16 Years, but Short Interest Surged 73%
VanEck J.P. Morgan EM Local Currency Bond ETF (NYSEARCA:EMLC) offers a 6.09% yield that draws income-focused investors, particularly retirees hunting for yield above what U.S.
Retirees Are Eyeing EMLC's 5.75% Yield While Wall St Bets Against It
Retirees chasing income have started paying attention to a corner of the bond market most U.S.
EMLC: High Risks From Capital Erosion And Currency Rates
The VanEck J.P. Morgan EM Local Currency Bond ETF receives a "Sell" rating for long-term investors due to steady capital decay and currency risk. EMLC offers broad emerging market sovereign debt exposure with moderate credit and interest rate risk. Despite outperforming developed market bond benchmarks, EMLC has underperformed inflation and suffered a 48% price decline since inception.
EMLC: It Might Be Time For Local Currency EM Bonds
EMLC is attractive now due to a weakening dollar, which boosts returns for local currency EM debt and supports positive fund performance. The ETF is best used tactically when global rates are falling and the dollar is weak, not as a long-term buy-and-hold investment. EMLC offers diversification benefits, with a low correlation to U.S. credit risk and a shallow drawdown profile compared to hard currency EM debt.
EMLC: I Expect Local Currency EM Debt To Keep Underperforming
Emerging market local currency bonds, as represented by VanEck J.P. Morgan EM Local Currency Bond ETF, have delivered poor returns over the past decade, underperforming both developed market bonds and EM equities. The yield spread between EM bonds and developed market bonds seems too narrow to justify the higher risk level. The nature of the asset class means that when individual EM countries run into trouble, it can have an outsized negative impact on returns.
EMLC: A High-Yield Hedge Against The End Of U.S. Dollar Hegemony
Emerging market local currency bonds, such as EMLC, offer US investors a hedge against US dollar volatility. EMLC has a low correlation with most major asset classes, providing portfolio diversification and a positive yield of 6.1%. Emerging markets generally exhibit better deficit spending and debt leverage than the US, accompanied by higher GDP growth.
EM Bonds Could Be Ideal 2025 Fixed Income Idea
Domestic bond yields shot higher Wednesday following Election Day. That could give some fixed income investors pause about riskier corners of the global bond market.
EMLC: This Bond ETF Has Been A Wealth Erosion Vehicle
EMLC, a bond ETF focused on emerging markets, has delivered negative returns over the past decade, while exposing investors to significant duration, currency, and credit risks. One of the main issues with EMLC is the depreciation of local currencies against the U.S. dollar, which has further eroded investor returns compared to USD-denominated bond ETFs like EMB. EMLC's high expense ratio and inadequate yield spread compared to Treasuries make it expensive, with significant risks from emerging market currency devaluation.
EM Bonds Could Be Ready for Their Close-Up
Broadly speaking, exchange traded funds focusing on dollar-denominated and local currency emerging markets debt are performing admirably this year. With the Federal Reserve poised to soon lower rates, more of the same could be in store.
Emerging Market Bonds Could Have Pleasant Surprises in Store
Conventional fixed income wisdom holds that high interest rates in the U.S. are problematic for emerging market debt and related ETFs. That scenario has played out this year, particularly for emerging market bonds denominated in local currencies.
With EM Bonds, Selectivity Matters
Emerging markets bonds, both of the dollar-denominated and local currency varietals, have followed broad measures of domestic debt lower this year. However, some corners of the developing fixed income space show signs of strength.
Emerging Markets Bonds Might Have Gains in Store
Dollar-denominated emerging markets are outpacing broader measures of U.S. bonds, including the Bloomberg U.S. Aggregate Bond Index, on a year-to-date basis, but local currency haven't joined the party as of yet. Some market observers believe that scenario is poised to change.
A Surprisingly Sturdy Corner of the Bond Market
Over the past several years, emerging market debt denominated in local currencies has been a resilient corner of the bond market. Over that span, the VanEck J.P.
EM Government Bonds Reap the Rewards of Fiscal Responsibility
By William Sokol, Director of Product Management Over the last five years, EM local currency debt has outperformed G7 government debt despite COVID, unprecedented Fed tightening, a strong dollar rally, wars in Ukraine and Gaza, and a slowing China.
EMLC: Forget Gold, Look To Foreign Currencies In 2024 - With A 6.4% Yield
In 2023, the US dollar has remained strong despite weak fundamentals compared to emerging markets and developed countries. The US Dollar appears likely to reverse in 2024 as real interest rates reverse. Higher commodity prices may significantly accelerate that shift in favor of emerging markets. Most emerging market countries in EMLC have superior fiscal responsibility and trade balances compared to the US and Europe.
EMLC: Avoid As Dollar Strength Persists
VanEck J.P. Morgan EM Local Currency Bond ETF is a difficult buy due to the poor performance of emerging market bonds. The EMLC ETF provides exposure to a diversified portfolio of local currency bonds issued by sovereign entities in emerging markets. The fund has a focus on comparatively robust emerging markets and offers potential benefits of diversification and higher yields, but also comes with higher risk.