Why Emerging Markets Corporate Bonds?
There are three reasons to consider an allocation to EM corporate debt: income, durable alpha and downside protection.
- With respect to income, there are $15 trillion of bonds globally with a negative yield. EM corporate debt has a yield north of 5.5%, and furthermore it is the fastest-growing supply of high income bonds in the market for the last 5 years.
- Secondly, with respect to durable alpha, in the EM corporate category the top quartile managers within it have consistently produced more alpha than other credit categories, and that speaks to the inefficiency in the asset class. Lastly, with respect to downside protection. There are a few different places to get a 5% - 6% income stream. Emerging corporates, very consistently in a period of negative return, preserve capital the best, and that has to do with the fact that there are less triple-C bonds than the overall market - less than 2% of the market is triple C rated credit category.
So again, to summarise that: income, durable alpha and downside protection are the real three merits of the category.
This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.
It is not intended for distribution to retail investors in any jurisdiction.