Ukraine, Ecuador
Ukraine 1H total return: 7.7% (16th out of 69 developing nations) Ecuador 1H total return: 2.2% (63rd out of 69 developing nations)
Outside of Venezuela, Ukraine and Ecuador bonds offer the highest yield by most measures, which puts them among DiClementi’s top three picks. Lystbaek also says the Eastern European nation’s notes are cheap.
Investors may be overestimating the political risk in Ecuador, according to Anders Faergemann, a senior fund manager in London at PineBridge Investments who oversees a local-currency bond fund that beat 83 percent of peers in the first half. Recently-elected President Lenin Moreno, a former vice president to socialist leader Rafael Correa, lacks the political capital to implement more radical policies and may steer the nation’s economy to a more business-friendly environment than expected, Faergemann said.
And while Ecuador bonds would likely rally with an uptick in crude, they’re less vulnerable to a drop in prices than most other bonds from oil-dependent nations, according to DiClementi.
The risk premium on emerging-market sovereign bonds was unchanged at 316 basis points as of 10:10 a.m. in New York Friday, according to JPMorgan Chase & Co. indexes.
This article was provided by Bloomberg News.