Research shows factors can help predict bonds returns in developed markets. But do they work for emerging markets bonds as well? Our findings suggest they do.
Excess bond returns in developed markets are predictable using factors like bond momentum, equity momentum, and term spread. This paper,1 shows the same factors can also predict the interest rates of emerging government debt issued in local currency. An investment strategy based on the three factors delivers 1.2% outperformance per year after transaction costs.
The study also shows that emerging local currency debt excess returns have a correlation of 31% with U.S. Treasury returns, and a correlation of just 6% with US high-yield credit excess returns. These results indicate that emerging market local currency debt yields behave more like developed government bond debt and less like credits.
1Duyvesteyn, J. and Martens, M., 2014, ‘Emerging government bond market timing, The Journal of Fixed Income.
This report is not available for users from countries where the offering of foreign financial services is not permitted, such as US Persons.
Your details are not shared with third parties. This information is exclusively intended for professional investors. All requests are checked.
The information contained in the website is solely intended for professional investors. Some funds shown on this website fall outside the scope of the Dutch Act on the Financial Supervision (Wet op het financieel toezicht) and therefore do not (need to) have a license from the Authority for the Financial Markets (AFM).
The funds shown on this website may not be available in your country. Please select your country website (top right corner) to view the products that are available in your country.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.