Although since 1997-98 Emerging Markets have become much more fiscally sound.I am interested in investing in Vanguard Bond ETF funds: the Vanguard Emerging Markets Government Bond ETF (VWOB) seems to offer the highest yield with something like a 5.64% return (see link below). What would be the risks of investing in such a fund? Could I expect returns at above 5% over the next 3 to 5 years? Why aren't more people interested in these types of bond fund ETFs? Thanks in advance!
https://investor.vanguard.com/investmen ... ofile/vwob [investor.vanguard.com]
And Developed Country markets much worse - partly due to demographics.
It's still the case that EM will likely have periodic crises. The fact that they issue bonds in USD (or EUR) primarily doesn't help you. Because if a country has an economic crisis and devaluation, it also stops paying on its debts. I think Argentina has defaulted 9 times?
You have to ask yourself whether in the current environment, where multi-lateral foreign institutions are not exactly "flavour of the month" with the likes of the US government, the IMF has the same capability to organise a restructuring? If it doesn't, bondholders could wait many years before they see any money.
So:
- risk and return are correlated
- EM bonds don't help you out of this box - the tradeoff is there
- if EM bonds offer superficially higher returns, it's also because there is higher credit risk (that's true of all bond funds)
Statistics: Posted by Valuethinker — Wed Jan 07, 2026 9:00 am — Replies 5 — Views 318