Investors seek emerging country debt

By Sophie Deviller, AFP

PARIS — The bonds of emerging countries, which have been following sounder policies than the United States and the eurozone, are attracting investors seeking to diversify risks as well as earn high returns. Today emerging markets represent 10-15 percent of the global debt market, up from 6 percent in 2000, and even big money managers such as PIMCO and BNY Mellon in the United States, or Swiss private bank Pictet have jumped into the game. “Since the summer and (when) the United States lost its triple-A rating” from Standard & Poor’s “there has been a very marked interest in this category of assets,” said Herve Thiard, director of Pictet Paris. “At more than 6 percent on average, the return on emerging country debt is very attractive in dollars as well as local currencies — it is more than three times that on U.S. Treasury bonds” that are currently yielding around 2 percent, explained Brigitte Le Bris, head of fixed-income investment at Natixis Asset Management.

Brazilian bonds denominated in reals bring in returns of over 12 percent per year currently. Another plus, the fundamentals of these countries are generally more solid than for the United States or the eurozone, which the Organization for Economic Cooperation and Development said is entering a slight recession. In a major role-reversal, emerging countries have now started lecturing advanced countries about the need to balance budgets. “The weak growth and deep deficits in developed countries drove the need for a geographical diversification in favor of countries with growth and … sound public finances,” said bond specialist Ernesto Bettoni at BNP Paribas bank.