High-yield bonds draw investors as emerging debt loses them

lunes 10 de marzo de 2014 08:06 GYT

By Carolyn Cohn

LONDON, March 10 (Reuters) - Shove over, emerging markets - high-yield debt has taken your place.

Emerging-market bonds, star performers just a year ago, are being replaced by high-yielding corporate debt from developed markets by investors searching for yield.

Emerging debt has fallen out of favour for many reasons. The United States began tapering monetary stimulus as its economic outlook improved. Treasury yields rose, encouraging developed world investors to bring money back home.

That led to an emerging-market sell-off and growth downgrades in emerging markets, particularly those dependent on foreign investor flows.

Add to that political flare-ups from Caracas to Kiev, plus the uncertainty of elections this year, and emerging debt markets have lost the appeal which saw them enjoying record-low yields only a year ago.

Demand has shifted to global high-yield bond funds, which have seen $22 billion of inflows since the beginning of last year, according to data from Boston-based fund tracker EPFR. Emerging-market debt has seen outflows of $38 billion.

To investors for whom safe-as-houses U.S. Treasuries aren't attractive enough, high-yield developed-world corporate debt - with "junk" ratings below BBB-minus - bridges the gap.

"People are going out of emerging-market debt and into high-yield, it's the only game on now," said Tim Dowling, a senior fund manager at ING Investment Management in New York.   Continuación...