HYEM: The Risks Of An Emerging Market Debt Crisis Are Real

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Unlocking Alpha
764 Followers

Summary

  • I believe concerns surrounding a potential EM debt crisis are real and should be seriously considered by investors before purchasing HYEM.
  • Despite the attractive yield, there are several risks such as unexpected higher inflation or a global recession that could impair the long-term performance of HY EM bonds.
  • The option-adjusted spreads indicate the market is starting to price in some of the risks, but we are still far from the 2020 peak.

Sunset over Phnom Penh

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Investment Thesis

Bonds have been a terrible investment YTD as their price had to adjust to one of the most aggressive monetary tightening cycles in recent history. Economists were particularly worried about emerging markets ("EM") since there is a

Morningstar

Morningstar

Morningstar

Morningstar

VanEck ETFs

VanEck ETFs

Morningstar

Morningstar

Refinitiv Eikon

Refinitiv Eikon

Federal Reserve

Federal Reserve

Refinitiv Eikon

Refinitiv Eikon

Fidelity

Fidelity

Refinitiv Eikon

Refinitiv Eikon

FRED/IMF

FRED/IMF

FRED/ICE

FRED/ICE

This article was written by

Unlocking Alpha profile picture
764 Followers
About me: Value-oriented investor, seeking low-risk investments with the potential to deliver high returns. I like to analyze commodities, ETFs, and cash-flow positive businesses that have a moat and growth opportunities.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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