A slew of factors are hampering emerging markets bond funds, including the iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:EMB), this year. One region, in particular, could be problematic for those funds in 2019.
EMB tracks the J.P. Morgan EMBI Global Core Index, a market-cap-weighted index. Potential investors should note that since it is a cap-weighted index, countries with greater debt will have a larger position in the portfolio. EMB, the largest emerging market fixed-income exchange-traded fund, is down more than 10% this year.
"Negative rating pressures emerged in several Latin American countries in 2018, and tightening external financing conditions, lukewarm and uneven growth, and persistent fiscal challenges and political risks will continue into next year," said