Developing market debt ETFs such as iShares J.P. Morgan USD Emerging Markets Bond Fund (EMB) and the PowerShares Emerging Markets Sovereign Debt Fund (PCY) have been popular this year with investors stretching for extra yield.
However, emerging market debt ETFs have been caught in a downward spiral since the end of April amid rising U.S. Treasury yields and speculation the Federal Reserve may trim its bond purchases. [Short Interest Surges in EM Bond ETF]
Emerging market currency ETFs have also been under pressure as U.S. government bond rates rise. [South Africa ETF Drops as Rand Hits Four-Year Low]
“Higher-yielding emerging-market assets have absorbed a pounding since early May as both weakening growth outlooks for the EM world and flight from riskier assets have stoked a broad shift away from EM bonds, stocks and currencies,” Dow Jones Newswires reports.
PCY and EMB are both down more than 10% from their recent highs and fell to fresh 52-week lows on Tuesday before recovering somewhat.
Next page: ‘Reaching for yield’