It has been a rough year for emerging markets bonds ETFs, both of the dollar-denominated and local currency varieties. The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB), the largest emerging markets bond ETF, ranks among the 10 worst ETFs in terms of 2013 outflows.
EMB is down 7.1% year-to-date while the rival PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) is off 9.3% and those numbers are with the benefit of Wednesday’s Federal Reserve no tapering-induced rally. Still, developing countries offer room for higher credit ratings and stronger balance sheets than their developed world peers, so there could be signs of hope for developing world debt. [For the Brave, EM Bond ETFs Offer Opportunity]
In a sign that pop culture could, and it is just speculation, impact emerging markets bond ETFs down the road, Armenia is issuing so-called “Kardashian bonds.” Perhaps that will stoke renewed interest in developing world debt funds. The sale of the bonds, named for the ubiquitous family of reality television fame and Armenian heritage, is Armenia’s first international sovereign debt sale, reports Luke Smolinski for the Financial Times.
There appears to be robust demand for the Kardashian bonds because Armenia was able to lower the yield on the issue to 6.25% from 6.375%, the FT reported. At 6.25%, the Kardashian bonds yield 90 basis points more than the 30-day SEC yield of PCY.
The Kardashian bonds are the latest signs of Armenia’s efforts to open its capital markets to foreign investors. Earlier this year, the central bank allowed dollar-denominated corporate bonds from Armenian issues to be traded on NASDAQ OMX Armenia.