Beyond Volatility: Emerging Market Bond ETFs to Watch Before 2025 Ends

Core Insights - Global investors are diversifying into emerging markets (EM) as they outperform developed markets, with the MSCI Emerging Markets index up 29.7% compared to the MSCI World index's 20.6% increase as of November 28, 2025 [1] Group 1: Emerging Market Trends - Emerging economies are experiencing robust growth due to strong domestic consumption and tech-related exports, particularly in countries like Vietnam and Malaysia [3] - EM central banks have shown stronger policy discipline by raising rates to combat inflation, resulting in higher real yields compared to the U.S. and Europe [4] - The debt-to-GDP ratios in countries like Brazil and Mexico are favorable compared to developed nations, attracting more investors [4] Group 2: Bond Market Dynamics - A weakening U.S. dollar has made dollar-denominated debt more affordable for emerging economies, enhancing the value of local assets for foreign investors [5] - With increasing volatility in developed-market equities, investors are seeking more predictable income streams, leading to a shift towards EM bonds [6] - EM bond ETFs have outperformed other dollar bond categories in 2025, with EM bonds yielding 7.5%, which is 2.8% higher than the broad U.S. bond market [7] Group 3: Investment Opportunities in EM Bond ETFs - iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has assets worth $15.87 billion and has gained 13.7% year to date, with a fee of 39 basis points [9] - Vanguard Emerging Markets Government Bond ETF (VWOB) holds $5.4 billion in assets and has risen 13.5% year to date, charging 15 basis points [10] - Invesco Emerging Markets Sovereign Debt ETF (PCY) has a net asset value of $21.85 and surged 17% year to date, with a fee of 50 basis points [12]