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More Colombia Could be Coming to Your EM Bond ETF


Colombian stocks have had a dismal run. The Global X FTSE Colombia 20 ETF (GXG) is off 14.1% in the past year, but the South American country’s sovereign debt got a lift Thursday on news of it possibly seeing a large footprint in some major emerging markets bond indices.

J.P. Morgan said it plans to increase Colombia’s weighting in the GBI-EM Global Diversified Index to 8.05% from 3.24% while the country’s weight in the GBI-EM Global Index could more than triple to 5.6% from 1.81%, Andrea Jaramillo reports for Bloomberg.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB), the largest emerging markets bond ETF, tracks a J.P. Morgan index, though not one of the aforementioned. Plus, EMB tracks dollar-denominated emerging markets bonds, but Colombia is EMB’s seventh-largest country weigh at 4.7%.

The iShares Emerging Markets Local Currency Bond ETF (LEMB) allocates over the 4% of its weight to peso-denominated bonds, but the $564.1 million ETF tracks the Barclays Emerging Markets Broad Local Currency Bond Index.

Colombia occupies a 4.5% weight in the Emerging Markets Aggregate Bond ETF (EMAG) while peso-denominated bonds account for 3.2% of the $822.3 million Market Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) . The actively managed WisdomTree Emerging Markets Local Debt Fund (ELD) has an almost 3.6% weight to peso debt.

In December , Fitch Ratings upgraded its long-term foreign issuer default rating on Colombia, South America’s second-largest economy, to BBB from BBB-. The ratings agency also made the same move on Colombia’s senior unsecured foreign bonds. Colombia’s debt-to-GDP ratio of 37.1% is impressive, particularly when measured against developed markets and peer emerging markets. [Colombia Gets Ratings Upgrade]

Market Vectors Emerging Markets Local Currency Bond ETF

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.