Earlier today, a report released by the Commerce Department in the U.S. showed that retail sales surprisingly fell in the month of March. A separate report showed that producer prices also dropped in the month of March. Both set of data suggest that the U.S. economy is still fragile.
Indeed, if the U.S economy remains in the present state then it is unlikely that the Federal Reserve will hike interest rates anytime soon. Although the Fed announced its first ever rate hike in a decade in December last year, interest rates in the U.S. remain near zero. Canadian benchmark interest rates are also at record low levels. Given that central banks in much of the developed world remain dovish, yield hungry investors have to look at emerging markets for attractive yields.
One way to gain exposure to emerging market debt is through ETFs such as the iShares JP Morgan USD Emerging Markets Bond Index (TSX: XEB). The fund provides exposure to U.S.-dollar denominated government bonds issued by emerging market countries. Through XEB, investors can gain access to sovereign debt of more than 30 emerging market countries in a single fund.
