Emerging Markets Outperform Developed Counterparts in Bond Sector

Luisa Crawford

Oct 14, 2025 06:03

Emerging markets are gaining fiscal dominance, with EM bonds benefiting from this trend. Learn about the factors driving this exceptionalism.

Emerging markets are solidifying their position as fiscal powerhouses, increasingly outperforming their developed counterparts. This trend is particularly evident in the bond sector, where Emerging Market (EM) bonds are reaping the benefits of this shift, according to VanEck.

Emerging Markets’ Fiscal Dominance

As emerging markets continue to display fiscal robustness, the appeal of their bonds has grown. The fiscal discipline and economic reforms undertaken by several emerging economies have enhanced investor confidence, leading to increased demand for EM bonds. This trend is supported by the resilience of these markets amidst global economic challenges.

Risks and Considerations

Investing in EM securities, however, carries higher risks compared to U.S. domestic investments. These may include exchange rate fluctuations, political instability, and less public information availability. Moreover, the securities markets in emerging economies can be more volatile and less liquid.

Benchmark Indices

The performance of EM bonds is often measured against benchmark indices such as the J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) and the J.P. Morgan Emerging Markets Bond Index (EMBI). These indices track local currency bonds and external debt instruments, respectively, providing a comprehensive view of the EM bond market’s health.

Investment Risks

Investors considering the VanEck Emerging Markets Bond ETF should be aware of various risks, including those related to active management, credit, currency strategies, and market volatility. The fund’s exposure to emerging market issuers also subjects it to additional risks such as political and economic instability and regulatory differences.

For more detailed information on the risks and potential benefits of investing in emerging markets, consider reviewing the available resources and disclosures provided by VanEck.

Image source: Shutterstock