There has been much talk about the benefits of investing in emerging markets equities, but there’s also a case for emerging markets debt.
Speaking at Aberdeen Global Asset Management’s 30th anniversary last night, Brett Diment, the company’s head of emerging market debt, explained why investors should consider bonds in developing market countries.
Emerging market economies have considerably lower debt-to-GDP ratios compared to the developed world. For example, Mexico’s is 43.2 versus the United States’ 111.7.
Yields are also considerably higher. The 10-year yield on Mexican government debt is 4.9% versus 2% on 10-year U.S. Treasuries.
Credit ratings for emerging markets are on the rise and now higher than developed markets. And Diment expects that trend will continue.
With the rise of the middle class in developing countries, those economies will continue to grow, making debt in those regions attractive.