Tack

Counterparty Risk Falls Further

Good points.


On Sep 25 12:17 PM Mad Hedge Fund Trader wrote:

> You really see this in emerging market bonds. A number of readers
> have asked me tocome up with a safe, high yielding investment in
> which to hide out incase the equity markets swoon again. That means
> they are looking for a security that offers a high fixed return,
> denominated in a strong currency that will benefit from future upgrades
> that will boost theprincipal over time. All of that is another name
> for the Invesco PowerShares Emerging Market Sovereign Debt ETF (seekingalpha.com/symbo...).
> The fund has 40%of its assets in bonds issued in Latin America and
> 31% in Asia, with the bulk of the maturities exceeding ten years.
> The two year old fund now boasts $340 million in market cap and pays
> a handy 6.42% dividend.This beats the daylights out of the nine basis
> points you currently earn for cash, the 3.40% yield on 10 year Treasuries,
> and still exceeds the 6.42% dividend on the iShares Investment Grade
> Bond ETN (seekingalpha.com/symbo... buys predominantly
> single “A” US corporates. The big difference here is that have a
> rosy future of further creditup grades to look forward to. It turns
> out that many emerging markets have little or no debt because until
> recently, investors thought theircredit quality was too poor. No
> doubt a history of defaults in Brazil and Argentina in the seventies
> and eighties is at the back of theirminds. With US government bond
> issuance going through the roof, the shoe is now on the other foot.
> A price appreciation of 125% over the past year tells you this is
> not exactly an undiscovered concept. Still,it is something to keep
> on your “buy on dips” list.