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VWOB: Value In EM Bonds With 5.3% Yield Despite Near-Term Pressures

Published Thu, 26 Mar 2020 02:26:38 -0400 on Seeking Alpha

VWOB invests in emerging markets U.S. dollar-denominated government bonds and related quasi-sovereign state-owned companies.
The coronavirus pandemic represents a major global disruption to economic activity, and emerging markets are particularly exposed given the importance of trade and commodities.
Despite significant stress to the credit profiles of several emerging market economies, we do not expect widespread defaults, suggesting the diversified VWOB bond portfolio should maintain value.
The deep selloff in the ETF in recent weeks has presented a compelling buying opportunity given a yield of 5.3% and a more favorable risk-adjusted returns outlook.
The Vanguard Emerging Markets Government Bond Index ETF (VWOB) invests in U.S. dollar-denominated bonds issued by foreign governments and quasi-government entities in emerging market ("EM") countries. We like VWOB as it provides exposure to this important segment of fixed-income that is typically overlooked by investors given its higher risk profile. At the same time, we think EM bonds can generate higher levels of returns going forward from current levels. Given the ongoing global coronavirus pandemic with extreme market volatility, VWOB is down by 11% from highs in early March. Recognizing the many challenges facing EM this year, we think the recent steep selloff now represents a compelling buying opportunity based on value along with the fund's 5.3% yield.

(Source: Finviz)
VWOB Background
VWOB track the "Bloomberg Barclays USD Emerging Markets Government RIC Capped Index". The Mexican government and related quasi-sovereign issuers from the country represent the largest holding in the fund at 10%. This is related to the index's market cap weighting methodology that considers the liquidity of all outstanding emerging market bond issuances.
Mexico is given high importance in the fund given a large number of U.S dollar-denominated bond issuances from the country that are liquid and actively... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ISHARES JPMORGAN USD EMERGING MARKETS BOND FUND 113.92   0.0 0.00 6.17 5.43

ISHARES JPMORGAN USD EMERGING MARKETS BOND FUND - EMB
ISHARES JPMORGAN USD EMERGING MARKETS BOND FUND - EMB  


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