Financial Professionals


EM Sovereign Debt Producing Market Leading Returns


Emerging market (EM) sovereign debt returns remained robust in April with the JP Morgan EMBI Global Index returning 1.56% for the month. The index is now up 5.09% year to date, with most of the return coming from lower U.S. Treasury yields as index level spreads are only tighter by 12 basis points (bps) year to date.

EM debt markets absorbed record corporate issuance of $58.1 billion in April. Market technical factors were supported by a positive material swing in EM debt retail fund flows, which were in solid positive territory for the entire month.

How Do EM Debt Returns Stack Up Vis-À-Vis Other Asset Classes YTD?

As of April 30, 2014 MTD YTD
JPM EMBI Global 1.56% 5.09%
U.S. 10-Year Treasury 0.86% 4.26%
JPM IG Index (Ex-EM) 1.20% 4.24%
JPM High Yield Domestic 0.68% 3.95%
S&P 500 0.62% 1.93%

During April, EMBI Global spreads were tighter by 8 bps and ended the month at 315 bps at the index level, contributing 54% of the monthly total return.  High yield sovereign bonds, led by Venezuela, were up 2.59% compared to investment grade returns of only 1.18%.

JP Morgan EMBI Global Index Country Returns for April

Top 5

Venezuela 9.00%  
El Salvador   4.51%  
Zambia 4.06%  
Turkey   3.90%  
Mongolia 3.76%  

Bottom 5

Angola -0.48%  
Costa Rica -0.57%  
Tanzania -0.88%  
Russia -2.66%  
Ukraine  -8.44%  

EM local markets and corporate debt markets continued to lag sovereign returns in April.

As of April 30, 2014  MTD  YTD
EMBI Global (Sovereign)  1.56%  5.09%
CEMBI (Corporate) 0.64% 3.36%
GBI EM Global Diversified (Local) 0.89% 2.81%

Data Sources: EM mutual fund flows: EPFR Global; All other data:  JP Morgan.

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.