JNK - HYEM: Frothy Markets Warrant Caution
2024-07-02 21:59:53 ET
Summary
- HYEM, a high-yield emerging market bond ETF, has rallied alongside U.S. junk bonds due to tightening credit spreads.
- The rapid issuance of EM bonds in 2024 suggests a frothy market, cautioning investors.
- EM credit spreads are near decade-long lows, limiting further upside potential.
- China's financial sector within HYEM may be more attractive than its U.S. counterpart due to completed balance sheet restructurings.
- HYEM offers diversification benefits, but may underperform in a downturn due to its high beta.
Thesis
The VanEck Emerging Markets High Yield Bond ETF ( HYEM ) is a fixed income exchange traded fund. We have covered this name before throughout time, with our last rating roughly a year ago, when we assigned it a 'Hold' after a prior 'Buy' rating:
Rating (Seeking Alpha)