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Podcasts & Videos

Looking for Corporate Bonds in Emerging Markets?

March 8, 2012
Bruce Lavine discusses Emerging Markets Corporate Bonds with Matt Duda of Western Asset Management.

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Definitions & Sources:
Sovereign debt - debt that is the direct obligation of a government issuer.
EM - emerging markets
External hard currency borrowing space:

Hard currency - a currency from a developed market country, such as the United States, that is highly liquid and widely accepted as a medium of exchange.
Spread products - bonds with credit risk generally have higher yields compared to bonds that are not subject to credit risk. The yield difference between a risky-bond and a risk-free bond of similar maturity is referred to as the yield spread.
Spread compression - a decrease in the yield differential between two or more bonds.
Spread convergence - the gradual decline to zero of the yield differential between two or more bonds.
Spread pickup - an increase in yield relative to another bond or security.
Duration - a measure of sensitivity of a bond's price to changes in interest rates.
Top down corporate credit analysis:
Top down- analysis that begins by examining broad, macroeconomic indicators and themes to formulate an investment thesis. Once specific countries have been identified, the analysis focuses on broad trends among various industry groups and sectors to direct investment decisions.
Bottom up corporate credit analysis:
Bottom up - analysis that focuses on the specific performance drivers and fundamentals of an individual company to measure the investment's merit. In “bottoms up” investing, Firm specific analysis occurs before broader considerations such as industry, sector, or geographical region risks.
EMD - emerging market debt

New issue market data. Source: JPMorgan, As of 31 Dec 11
EM corporate credit market & U.S. high yield market comparison. Source: JPMorgan, Barclays Capital, As of 31 Dec 11
EM corporate market growth. Source: JPMorgan, Morningstar, As of 31 Dec 11
The JPMorgan Corporate Emerging Markets Bond Index Broad (CEMBI Broad) is a market capitalization weighted index consisting of US dollar-denominated Emerging Market corporate bonds. The index serves as a global corporate benchmark representing Asia, Latin America, Europe and Middle East / Africa. US dollar-denominated corporate issues from index-eligible countries are narrowed further by only including issues with more than $300m current face outstanding and at least five years to maturity (at the time of inclusion into the index). You cannot invest directly in an index.
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Matt Duda
Portfolio Manager and Research Analyst
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Bruce Lavine
President & Chief Operating Officer of WisdomTree
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