iShares J.P. Morgan EM Local Currency Bond (ARCA: LEMB)

最新ニュース iShares J.P. Morgan EM Local Currency Bond (ARCA:LEMB)

iShares Emerging Markets Local Currency Bond

The Fund seeks to track the investment results of the J.P. Morgan GBI-EM Global Diversified 15 percent Cap 4.5 percent Floor Index, which tracks the performance of local currency-denominated sovereign bond markets of emerging market countries. All bonds included in the Underlying Index are selected according to a set of rule-based inclusion criteria regarding issue size, bond type, maturity, and liquidity.

Blackrock Cash Funds: Treasury, Sl Agency Shares

iShares JP Morgan EM Local Currency Bond ETF

iShares J.P. Morgan EM Local Currency Bond

As U.S. Treasuries wobble under the weight of budget deficits and rate uncertainty, <a href="https://in.benzinga.com/markets/emerging-markets">emerging market debt</a> is quietly staging a comeback — offering higher real yields, currency resilience, and inflation breathing room.
Investors accustomed to reflexively retreating to Treasuries in times of volatility are reconsidering. The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) is down over 8% over the past year, and still negative year-to-date.
In contrast, EM debt ETFs are showing strength: the iShares JP Morgan EM Local Currency Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LEMB#NYSE">LEMB</a>) is up nearly 10% year-to-date, while the VanEck JP Morgan EM Local Currency Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EMLC#NYSE">EMLC</a>) and the SPDR Bloomberg Emerging Markets Local Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EBND#NYSE">EBND</a>) have returned over 7%.
Even more compelling? These gains come as local inflation trends across emerging markets soften, not heating up.
Read Also: <a href="https://www.benzinga.com/etfs/specialty-etfs/25/06/46064634/vanguard-slashes-fees-across-european-fixed-income-ucits-etfs-enhancing-low-cost-investing-options">Vanguard Slashes Fees Across European Fixed Income UCITS ETFs, Enhancing Low-Cost Investing Options</a>
<h3 class="wp-block-heading">Real Yield Advantage Is Back</h3>
<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1024" height="611" src="https://editorial-assets.benzinga.com/wp-content/uploads/2025/06/24065955/image-355-1024x611.png" alt="" class="wp-image-959609" style="width:736px;height:auto" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2025/06/24065955/image-355-1024x611.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/06/24065955/image-355-300x179.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/06/24065955/image-355-768x458.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/06/24065955/image-355-1536x916.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/06/24065955/image-355.png 1979w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
The numbers tell the story:
<ul class="wp-block-list">
<li>Brazil&#8217;s 10-year government bond yields sit at a jaw-dropping 13.84%, while inflation has cooled to 5.32% &#8211; still above target but declining. That's a real yield north of 8%. </li>
<li>India's 10-year yield is 6.36% with inflation just 2.82%.</li>
<li>Indonesia yields 6.76% against inflation of 1.6%.</li>
</ul>
Compare that with the U.S., where 10-year yields are 4.35% and inflation ticked up to 2.4% in May, after four straight months of decline. While still moderate, the uptick &#8211; driven by food and transportation &#8211; suggests limited near-term relief for real yields. Core inflation held steady at 2.8%, reinforcing the Fed's cautious stance.
In short, emerging markets are offering stronger inflation-adjusted returns, with less policy ambiguity.
<h2 class="wp-block-heading">Currency Strength Adds Another Layer</h2>
For years, dollar dominance made EM debt vulnerable. Not anymore. 
The DXY dollar index is down nearly 10% YTD, and Brazil's real has strengthened over 11% against the dollar, boosting total return potential. 
While India and Indonesia have seen more stable currencies, their resilience against the greenback is still a win in the EM debt playbook.
<h2 class="wp-block-heading">Rate Cut Room &amp; Policy Stability</h2>
With inflation falling and real yields rising, central banks in emerging economies now have room to cut rates &#8211; a powerful tailwind for bond prices. 
India's CPI just hit a six-year low, Brazil is inching toward its inflation target, and Indonesia remains firmly within its policy range. 
That's in stark contrast to the U.S., where the Fed remains caught between stickier core inflation and concerns over fiscal slippage.
<h2 class="wp-block-heading">How To Play It</h2>
For investors looking to diversify income streams and hedge against dollar volatility:
<ul class="wp-block-list">
<li>LEMB: Up 9.88% YTD, offers broad exposure to sovereign debt in local currency.</li>
<li>EMLC: Up 7.43% YTD, tracks J.P. Morgan's benchmark for EM local debt.</li>
</ul>
These funds also benefit from exposure to stronger currencies and improving macro fundamentals.
U.S. Treasuries may still be the default play for safety, but in 2025, the risk-adjusted returns are flowing toward emerging markets. 
With inflation falling, currencies stabilizing, and yields sky-high, EM debt isn&#8217;t just an alternative anymore &#8211; it might just be the new safe haven.
Read Next: 
<ul class="wp-block-list">
<li><a href="https://www.benzinga.com/markets/equities/25/06/46014647/wall-street-watches-as-money-flows-out-of-us-markets-is-the-great-rotation-here">Wall Street Watches As Money Flows Out Of US Markets — Is The &#8216;Great Rotation&#8217; Here?</a></li>
</ul>
Image: Shutterstock

Bonds

Emerging Markets

Markets

EBND

Market Vectors Emerging Markets Local Currency Bond ETF

EMLC

LEMB

iShares Trust Barclays 20+ Year Treasury Bond Fund

Bond Bulls Look To Brazil, India, Indonesia As Emerging Market Debt Rallies

The bond market of emerging economies has experienced a strong upswing in recent sessions, driven by rising expectations that the Federal Reserve is nearing a policy shift <a href="https://www.benzinga.com/topic/interest-rates">toward cutting interest rates.</a>
The iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EMB#NYSE">EMB</a>), which tracks dollar-denominated bonds from around 30 emerging-market governments, has rallied to levels last seen in May 2022, recording gains in nine of the last ten sessions.
Similarly, the iShares J.P. Morgan EM Local Currency Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LEMB#NYSE">LEMB</a>), which invests in local-currency-denominated bonds from emerging markets, has climbed to a one-year high.
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="548" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/20154315/image-172-1024x548.png" alt="" class="wp-image-504542" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/20154315/image-172-1024x548.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/20154315/image-172-300x161.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/20154315/image-172-768x411.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/20154315/image-172-1536x822.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/20154315/image-172.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h3 class="wp-block-heading">EM Bonds Rally As Traders Eye Lower U.S. Interest Rates: Dollar Weakens</h3>
Much of this outperformance in the local currency sovereign bond market has been concentrated in Latin America and in countries like Mexico, Brazil, and Poland, which have struggled for much of this year, according to Tadas Gedminas, an analyst at Goldman Sachs.
Gedminas also highlighted that &#8220;diminishing U.S. growth exceptionalism and greater confidence in the start of the Fed&#8217;s easing cycle should ease constraints on emerging market policymakers and support a broader cycle of rate cuts across these economies.&#8221; 
Goldman Sachs anticipates that central banks in South Korea, South Africa, and India will begin easing policy rates before the year ends.
Traders are fully pricing in a U.S. rate cut in September, with market-implied probabilities suggesting a 73% chance of a 25-basis-point cut, with additional reductions expected in November and December.
On the currency front, the U.S. dollar has weakened in August, particularly against Asian currencies. 
The greenback has fallen by 5% month-to-date against the Indonesian rupiah, marking the rupiah&#8217;s best-performing month since April 2020. 
The dollar has also depreciated by between 3% and 4% against the Malaysian ringgit, Thai baht, Philippine peso, and Korean won. 
In Latin America, the dollar has dropped by over 3% this month against the Brazilian real, on track to end a streak of seven consecutive months of strengthening.
<h3 class="wp-block-heading">Improving Capital Inflows Into EM Economies</h3>
An International Monetary Fund (IMF) report released last week highlighted a slight recovery in net capital inflows to emerging markets and developing economies from the lows experienced in 2022, although they remained negative overall in 2023. 
Excluding China, which continued to account for a large share of negative net capital inflows, other emerging markets as a group saw positive and increasing inflows.
High-frequency data from the IMF indicate that gross portfolio inflows into emerging markets, excluding China, were positive in the first few months of 2024. 
These inflows were influenced by &#8220;fluctuations in U.S. financial conditions, with optimism in financial markets and the limited depreciation of the U.S. dollar in the fourth quarter of 2023 helping to rekindle capital inflows to emerging markets,&#8221; the Fund wrote. 
Now Read:
<ul>
<li><a href="https://www.benzinga.com/markets/equities/24/08/40469009/a-bar-of-pure-gold-is-now-worth-1-million-what-can-it-buy-you">A Bar Of Pure Gold Is Now Worth $1 Million: What Can It Buy You?</a></li>
</ul>
Image: Shutterstock

Asia

Latin America

Emerging Market ETFs

Global

Econ #s

Federal Reserve

ETFs

iShares JPMorgan USD Emerging Markets Bond Fund

UTEN

Emerging Market Bonds Climb To Over 2-Year High Driven By Weaker Dollar, Fed's Interest Rate Shift

China is poised to command a larger percentage of equity-based emerging markets exchange traded funds thanks to index provider MSCI Inc.&#39;s (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/msci#NYSE">MSCI</a>) plan to boost its international benchmarks&#39; exposure to A-shares, the stocks trading on mainland China.
That news was announced <a href="https://www.benzinga.com/trading-ideas/long-ideas/19/03/13275007/msci-indexes-will-see-larger-a-shares-weights">earlier this year </a>and it&#39;s not the only big news pertaining to China&#39;s footprint in emerging markets indexes and the related ETFs.
<h3>What Happened</h3>
China&#39;s massive yuan-denominated bond market is opening up to international investors, which could mean the country will become part of the lineups in local currency emerging markets bond ETFs, such as the iShares J.P. Morgan EM Local Currency Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/lemb#NYSE">LEMB</a>).
&ldquo;China&rsquo;s local-currency bond market is opening up to global investors,&rdquo; <a href="https://www.blackrockblog.com/2019/04/22/new-opportunities-chinese-bonds">said BlackRock in a recent note</a>. &ldquo;The Bloomberg Barclays Global Aggregate Index begins including yuan-denominated bonds this month, automatically adding exposure to such bonds for index investors. We favor maintaining such passive exposure and preparing to invest more.&rdquo;
<h3>Why It&#39;s Important</h3>
As its name implies, the $665 million LEMB tracks a JPMorgan index, specifically, the J.P. Morgan GBI-EM Global Diversified 15% Cap 4.5% Floor Index. JPMorgan is consulting with clients about the inclusion of yuan-denominated bonds in its international bond benchmarks and could announce a decision to that effect in the <a href="https://www.reuters.com/article/us-china-bonds-index-explainer/explainer-why-chinas-inclusion-in-global-bond-benchmarks-matters-idUSKCN1RA0MU">next several months</a>.
China&#39;s bond market is valued at $13 trillion, making it the world&#39;s third-largest. LEMB has no exposure to China. The ETF has exposure to nearly 20 countries with Brazil and Mexico, Latin America&#39;s two largest economies, combining for 21.43 percent of the fund&#39;s weight.
&ldquo;The inclusion of local-currency government and policy bank securities into the global bond market benchmark index is set to gradually occur over a 20-month period,&rdquo; according to BlackRock. &ldquo;Those passively invested in that index will, by default, add Chinese bond exposure to their holdings &ndash; which we view as a positive. Local-currency Chinese bonds are set to make up roughly 6% of the global fixed income benchmark when the phase-in is complete.&rdquo;
When yuan-denominated bonds join the Bloomberg Barclays Global Aggregate Index, the Chinese currency would be the fourth-largest currency weight in the index behind the U.S. dollar, euro and yen.
<h3>What&#39;s Next</h3>
Assuming yuan-denominated bonds are included in JPMorgan indexes, LEMB could see an improvement in its credit quality. Currently, about two-thirds of the fund&#39;s 216 holdings are rated BBB, BB or B, all below S&amp;P&#39;s A+ sovereign credit rating on China.
Related Links
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/19/04/13574492/a-broad-emerging-markets-etf-with-a-modest-fee">A Cheap EM ETF</a>
<a href="https://www.benzinga.com/trading-ideas/long-ideas/19/04/13574488/printing-green-with-a-green-bond-etf">A Unique Bond ETF</a>

Long Ideas

Trading Ideas

MSCI

Expect More China In These ETFs

One of the hottest corners of the fixed income market is positioned to continue delivering upside as the U.S. dollar remains lethargic and bond investors continue embracing higher-yielding opportunities. Emerging markets debt is on a torrid pace of performance and, when it comes to exchange-traded funds, adding new assets.
For example, the iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ: <a class="ticker" href="/stock/emb#NASDAQ">EMB</a>), the largest emerging markets bond fund of any variety, is up more than 9 percent year to date. EMB and rival dollar-denominated emerging markets bond funds are benefiting from the dollar&#39;s status as a disappointing developed market currency and the lack of a significant increase in U.S. Treasury yields.
Of course, yield helps. Even with its impressive year-to-date gain, EMB still sports a solid 30-day SEC yield of 4.4 percent. That is a lot better than what investors find on Treasuries or aggregate bond ETFs, which are usually heavily allocated to Treasuries and mortgage-backed securities.
<h3>Catalysts Abound</h3>
In the eyes of some market observers, emerging markets bonds have the wind at their backs when it comes to delivering more capital appreciation for investors.
&ldquo;We like selected EM debt for income and potential price appreciation amid low inflation and subdued currency volatility in the emerging world,&rdquo; said BlackRock <a href="https://www.blackrockblog.com/2017/10/13/6-investing-ideas/?utm_source=blog&amp;utm_medium=hero&amp;utm_campaign=hero">in a recent note</a>. &ldquo;EM debt also gleans support from synchronized global growth, commodity prices and global investor thirst for yield.&rdquo;&nbsp;
Another important catalyst is the capacity for emerging markets central banks to lower interest rates, something that off the table in much of the developed world.
&ldquo;Unlike developed market (DM) central banks, many EM counterparts have room to cut rates given a backdrop of steady growth and subdued inflation,&rdquo; said BlackRock. &ldquo;This should lead to a further narrowing of interest rate differentials versus the rest of the world as the Federal Reserve leads its DM peers in normalization. We expect relative price outperformance in EM debt as a result.&rdquo;
<h3>Another Idea</h3>
In addition to EMB, another idea to consider is the iShares J.P. Morgan EM Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>). As its name implies, the iShares J.P. Morgan EM Local Currency Bond ETF holds debt denominated in local currencies, meaning it can benefit when the dollar is weak. For the added risk of embracing emerging markets currencies, investors get a higher yield of 5.55 percent with LEMB.
&ldquo;Stronger EM currencies have boosted the performance of EM local-currency debt this year,&rdquo; said BlackRock. &ldquo;We see the U.S. dollar appreciating only modestly and gradually&mdash;and not diluting the EM investment case. So what are the main risks? A stalling of global growth momentum, a yield spike caused by slowing monetary stimulus, or a rapidly resurging dollar.&rdquo;
Related Links:
<a href="https://www.benzinga.com/trading-ideas/long-ideas/17/10/10174201/sizing-up-small-cap-momentum">Sizing Up Small-Cap Momentum</a>
<a href="https://www.benzinga.com/trading-ideas/long-ideas/17/10/10174219/a-new-mega-cap-etf-comes-to-town">A Rookie Mega-Cap ETF</a>

Forex

Where To Be With Bond ETFs

Fixed income exchange-traded funds are enjoying plenty of enthusiasm for investors this year. Flows data confirm as much, but advisors and investors keep pumping cash into U.S. Treasury ETFs. That does not change the fact short and middle duration Treasury ETFs are more defensive than legitimate yield plays.
<h3>Emerging Markets' Sovereign Debt</h3>
ETFs holding emerging markets' sovereign debt are where stout yields are found among government bond funds. For example, the $8.1 billion iShares JPMorgan USD Emer Mkt Bnd Fd ETF(NYSE: <a class="ticker" href="/stock/emb#NYSE">EMB</a>), now the largest emerging market bond fund in the world, sports a 30-day SEC yield of 4.62 percent. In a world of low yields on U.S. Treasurys and negative yields in other parts of the developed world, EMB tempts.
With good reason. Brexit significantly reduced the chances of the Federal Reserve raising interest rates this month or maybe even this year. The case for the dollar-denominated debt held by EMB and rival ETFs is bolstered in the a &ldquo;lower for longer&rdquo; environment because emerging markets bonds denominated in dollars have previously proven sensitive to rising Treasury yields.
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/trading-ideas/long-ideas/16/07/8221013/a-dominant-dividend-etf">A Dominant Dividend ETF</a></bzrelatedlink>
It is easy to understand investors&#39; thirst for developing world debt. As <a href="http://www.benzinga.com/analyst-ratings/analyst-color/16/06/8086054/an-obvious-catalyst-for-gold-etfs">Benzinga reported </a>last month, &ldquo;A whopping $8 trillion in global investment-grade sovereign debt currently sports negative yields, meaning investors that make those bets will lose money. The World Gold Council adds 40 percent of global sovereign debt sports yields below 1 percent.&rdquo;
&ldquo;Yet the segment still looks attractive given persistently low developed market bond yields. We believe this relative yield advantage will be a main driver of EM debt returns in the second half. We see hard-currency EM debt providing a more stable income stream than local currency options. EM local debt may offer more upside, however, for those willing to accept currency risk,&rdquo; said <a href="https://www.blackrockblog.com/2016/07/18/look-for-income-em-debt/">BlackRock </a>in a recent note.
<h3>Currencies And Falling Bond Yields</h3>
Rebounding emerging markets currencies coupled with falling bond yields in some large developing economies add support for ETFs such as the iShares Emerging Markets Local Currency Bond (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>).
LEMB has a 30-day SEC yield of 4.23 percent with an effective duration of 4.9 years. The ETF is not exceptionally risky in terms of credit quality, as nearly 52 percent of LEMB&#39;s 210 holdings are rated AA or A. Low beta South Korea and volatile Brazil, which has seen sovereign yields decline in recent weeks, combine for over 34 percent of LEMB&#39;s geographic weight.
Did you like this article? Could it have been improved? Please email <a href="mailto:feedback@benzinga.com">feedback@benzinga.com</a> with the story link to let us know!

Specialty ETFs

EM Bond ETFs: Desirable Yield Destinations

Nigeria is Africa&#39;s largest economy, but liquidity issues are hampering the country&#39;s local currency-denominated debt, prompting JPMorgan Chase &amp; Co. to remove the country from its local-currency emerging market bond indexes. More than $200 billion tracks those benchmarks.

	&quot;Nigeria will not be eligible for re-entry for at least 12 months from the date of exclusion, JPMorgan said. The country has a 1.5 percent weighting in the biggest GBI-EM index, which is tracked by $183.8 billion of funds, according to the bank,&quot; reports <a href="http://www.bloomberg.com/news/articles/2015-09-08/jpmorgan-to-remove-nigeria-from-emerging-market-bond-indexes">Bloomberg News</a>.

	The news, originally reported Tuesday, did not get pressure the Global X MSCI Nigeria ETF (NYSE: <a class="ticker" href="/stock/nge#NYSE">NGE</a>). NGE, the lone Nigeria ETF, participated in a rally that lifted stocks around the world, soaring nearly 3.8 percent. Still, the lone Nigeria ETF is off 5.7 percent year-to-date. NGE is one of just three country-specific ETFs tracking a nation that is a member of the Organization of Petroleum Exporting Countries (OPEC).

	Nigerian equities bear the <a href="http://www.benzinga.com/trading-ideas/long-ideas/15/08/5781305/kazakhstan-currency-devaluation-has-unexpected-etf-impact">frontier market designation</a> and the country is one of the largest weights in the iShares MSCI Frontier 100 ETF (NYSE: <a class="ticker" href="/stock/fm#NYSE">FM</a>).

	JPMorgan&#39;s decision to boot Nigeria from its local-currency bond indexes, a move that will be complete next month, does not have widespread ETF impact. The iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSE: <a class="ticker" href="/stock/emb#NYSE">EMB</a>), the largest emerging markets bond ETF, tracks a JPMorgan index, but the bonds held by the fund are dollar-denominated.

	However, the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>) does track the J.P. Morgan GBI-EMG Core Index (GBIEMCOR) and currently features a 3.1 percent allocation to naira-denominated debt, <a href="http://www.vaneck.com/funds/EMLC.aspx">according to issuer data</a>.

	EMLC has a 30-day SEC yield of 6.65 percent and is home to $1.2 billion in assets under management.

	Neither the actively managed WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>) nor the iShares Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) hold naira-denominated bonds.

	The yield on Nigerian bonds reflects the risk associated with that debt. For example, the yield on Nigerian 10-year bonds jumped to 16.15 percent on September 7. That is more than quadruple the trailing 12-month dividend yield of 3.7 percent found on NGE.

News

Intraday Update

Nigeria Gets A Bond Index Demotion

Over the past two weeks, much has been made about ETFs and the drift away from underlying net asset values that occasionally occurs with these products.

	Some of the coverage of this issue, mainly from those publications devoted to ETFs or from those with intimate knowledge of the asset class, has been important, eye-opening and solid.

	Unfortunately, a day or two of a microscopic percentage of the total U.S. exchange-traded products universe trading at noticeable discounts or premiums to NAV sparked alarmist, downbeat coverage of the issue that backhandedly sought to cast ETFs in a sour light. Hey, when not one, but two financial news organizations bring up the three-year old Kauffman Foundation criticism of ETFs without mentioning at least two important facts about that report, readers of those articles are being treated to only part of the story.

	As for that report, which has since been widely discredited, just remember that Tom McDonnell, president and chief executive officer of the Ewing Marion Kauffman Foundation, used to run a company called DST Systems (NYSE: <a class="ticker" href="/stock/dst#NYSE">DST</a>). In fact, he ran DST when the Kauffman report was published. DST provides "distribution support systems for the United States and international mutual fund companies," among other businesses, <a href="http://finance.yahoo.com/q/pr?s=DST+Profile">according to Yahoo Finance</a>. That was not mentioned in the recent stories that highlighted the Kauffman report.

	There are other problems with the ETF/NAV "debate." A financial adviser <a href="http://www.bloomberg.com/news/2013-07-01/etf-investors-are-caught-by-surprise-as-prices-diverge.html">quoted in a Bloomberg piece out Monday</a> said this: "I don't think most people have any clue that the prices they're paying or selling at can veer significantly from NAV."

	That might be true. Alright, it probably is, but it does not have to be. Nor do investors, retail or professional, need to be scared about ETFs frequently veering away from NAV because the numbers paint a different picture.

	For the purposes of this exercise, we examined ETFs tracking three different asset classes: U.S. equities, bonds and emerging markets stocks. We focused on two of the four largest issuers: BlackRock's (NYSE: <a class="ticker" href="/stock/blk#NYSE">BLK</a>) iShares and Invesco's (NYSE: <a class="ticker" href="/stock/ivz#NYSE">IVZ</a>). Add up the ETFs issued by those companies and the total is over 300, roughly 20 percent of the total U.S. exchange-traded products universe. Here is what we turned up in terms of NAV premium and discount gaps.

	iShares 
	For iShares, we started with the iShares U.S. Medical Devices ETF (NYSE: <a class="ticker" href="/stock/ihi#NYSE">IHI</a>), an ETF that though it is not small with $388.4 million in assets under management, does not get a lot of attention or at least not <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/06/3686609/interesting-similarities-among-2013s-top-performing-etfs">not enough for some experts</a> that associate popularity with performance.

	Although IHI does not even have average daily volume of 73,000 shares, most of its top-10 holdings, which account for 62.5 percent of the ETF's weight, have decent (at worst) volume. Fact: During every single trading day of the second quarter, IHI never traded at anything more than a 0.5% discount or premium to its NAV. Same goes for <a href="http://tools.ishares.wallst.com/ishares/qc/old_us/research/tools/premiumDiscount.asp?quarter=3-2012">the previous three quarters</a>.

	Next, there is the iShares Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>). The combination of emerging markets denominated in local currencies would surely imply liquidity issues and major discounts or premiums to NAV, right? Not really. The widest premium LEMB saw in the second quarter was 1.55 percent. Including the second quarter, the most elevated premium LEMB saw over the prior four quarters was just under two percent.

	In the first quarter of this year, LEMB spent nearly every trading at a premium of one percent to 1.5 percent of its NAV, <a href="http://tools.ishares.wallst.com/ishares/qc/old_us/research/tools/premiumDiscount.asp?quarter=1-2013">according to iShares data</a>. Sorry folks, that is not much to be alarmed about.

	The iShares MSCI Philippines ETF (NYSE: <a class="ticker" href="/stock/ephe#NYSE">EPHE</a>) is our final iShares selection because this fund has spent more time in the spotlight <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/06/3694555/four-more-facts-about-em-etfs-you-need-to-know-now">for all the wrong reasons </a> recently than investors that own it care to remember.

	Bloomberg correctly observes that EPHE "swung from a 4.7 percent premium to a 6.1 percent discount and back to a 2 percent premium in the space of nine trading days through June 25." The other side of the coin is that iShares data show the largest discount in the previous three quarters was just 1.99 percent and that EPHE. Said differently, in roughly 180 trading days comprising the third and fourth quarters of 2012 and the first quarter of 2013, EPHE never even traded with a two percent premium.

	PowerShares 
	PowerShares data highlights the relationship of its ETFs to NAV in a different way by showing the percentages by which the mid-point of an ETF's bid/ask spread exceed NAV or are discounted. We chose the The PowerShares DWA SmallCap Technical Leaders Portfolio (NYSE: <a class="ticker" href="/stock/dwas#NYSE">DWAS</a>), an ETF that has recently outpaced some of <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/06/3717099/another-hedge-fund-etf-mistake">large small-cap rivals</a>.

	In theory, the small-cap space could be fertile ground for wide spreads and liquidity issues. However, in the 113 days DWAS traded in leading up to the start of the second quarter, there were only four occasions in which the bid/ask mid-point was noticeably above NAV and only two times did the number exceed two percent. Only one noticeable discount to NAV was seen over the same period, <a href="http://www.invescopowershares.com/products/overview.aspx?ticker=DWAS">according to issuer data</a>.

	There has been plenty of ongoing chatter about liquidity and premium/discount spreads in the high-yield bond market. And yes, in times of market stress, bond funds, but on most days, most bond ETFs are trading within tolerable margins of their NAVs.

	In 2012's 250 trading days, the bid/ask mid-point on BKLN never exceeded one percent and on 100 occasions its was just 0.5 to 0.99 percent above NAV. That did not happen at all in the first quarter, nor does BKLN have a history of trading at wide discounts.

	The iShares MSCI Emerging Markets Index Fund (NYSE: <a class="ticker" href="/stock/eem#NYSE">EEM</a>) was lambasted for one day where the ETF traded at a significant discounted to its NAV. As has been noted in the days since then, some veering away from NAV happens with emerging markets ETFs, particularly multi-country funds, because most of the countries' markets represented within the fund are closed while U.S. markets are open.

	This is the case with the PowerShares FTSE RAFI Emerging Markets Portfolio (NYSE: <a class="ticker" href="/stock/pxh#NYSE">PXH</a>). China, Brazil, Taiwan and Russia combine for nearly two-thirds of PXH's country weight. PXH traded at a premium or discount to the mid-point of its NAV in about one of every three trading days last year and at a premium 16 times in the first quarter.

	However, there was only occasion of PXH trading at a premium of two percent or more and only five times did the ETF trade at a discount of one to 1.99 percent.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Sector ETFs

Broad U.S. Equity ETFs

Short Ideas

New ETFs

Currency ETFs

Small Cap

DWAS

ISHARES MSCI PHILIPPINES INVESTABLE MARKET INDEX FUND

EPHE

iShares Dow Jones US Medical Devices Index Fund

PowerShares Exchange-Traded Fund Trust II PowerShares FTSE RAFI Emerging Markets Portfolio

Numbers Don't Lie in ETF/NAV Debate

Already in a tenuous technical spot because of a year-to-date tumble of 11.5 percent, the iShares MSCI Brazil Capped Index Fund (NYSE: <a class="ticker" href="/stock/ewz#NYSE">EWZ</a>) could be facing more troubling times ahead. Late Thursday, Standard &amp; Poor's lowered its ratings outlook on Brazil, Latin America's largest economy, to negative from stable.

	The S&amp;P downgrade comes barely more than a week after Brazil's central did the almost unimaginable in the current environment by raising interest rates <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/05/3633819/believe-it-brazil-hikes-rates-and-etfs-rise">by 50 basis points to eight percent</a>. The 50-basis point increase shows the Brazilian central bank's resolve when it comes to fighting inflation.

	However, that interest rate increase was not appease to S&amp;P. The ratings agency cited slowing economic growth, weaker fiscal and external fundamentals "and some loss in the credibility of economic policy" among reasons for the lowered outlook. While S&amp;P affirmed its BBB credit rating on Brazil, it warned the negative outlook implies a one-in-three chance Brazil's rising debt burden and fragile macroeconomic outlook could result in a ratings downgrade over the next two years, <a href="http://www.ft.com/cms/s/0/6aeb9bba-cf04-11e2-8e16-00144feab7de.html#axzz2VVjBqvLc">The Financial Times reported</a>.

	In addition to rising rates and inflation, Brazil is also dealing increasing unemployment, a plunging currency and concerns about <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/05/3584322/stadium-readiness-puts-brazil-infrastructure-etf-in-focus">its ability to host the 2014 World Cup</a>. Those factors explain why EWZ is off 9.3% in just the past month,

	What's Next For EWZ? 
	For the near-term impact that S&amp;P's outlook change can have on Brazil ETFs investors need only to look to India. In April 2012, S&amp;P cut its outlook on India <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/02/3378215/india-etfs-plunge-on-higher-budget-news">to negative from stable</a> while warning Asia's third-largest economy could lose its already tenuous grasp on the lowest investment-grade credit rating.

	Obviously, there can be no guarantees that EWZ and other major Brazil ETFs such a the Market Vectors Brazil Small-Cap ETF (NYSE: <a class="ticker" href="/stock/brf#NYSE">BRF</a>) will follow a similar trajectory. However, over the 60 days following S&amp;P lowering its outlook on India, the WisdomTree India Earnings ETF (NYSE: <a class="ticker" href="/stock/epi#NYSE">EPI</a>) lost almost 12 percent while the Market Vectors India Small-Cap ETF (NYSE: <a class="ticker" href="/stock/scif#NYSE">SCIF</a>) lost more than 15 percent.

	On Friday, with U.S. stocks surging on the back of a strong May jobs report, EWZ is off two-thirds of a percent and struggling to stay above the important $50 area. BRF is down one percent.

	Bonds 
	Already under pressure due to fears about the end of quantitative easing, rising yields on U.S. 10-year Treasurys and currency weakness, emerging markets bond ETFs, one of 2012's favorite yield destinations, have suffered this year.

	Plenty of those ETFs are heavy on Brazil and that is not a good thing at a time when the yields on Brazilian 10-year sovereign bonds have surged 104 basis points in the past month, <a href="http://www.bloomberg.com/markets/rates-bonds/">according to Bloomberg data</a>. The yield spread between those bonds and the equivalent U.S. Treasurys is about 150 basis points.

	With Brazil raising interest rates and now, a ratings agency there is a chance of a sovereign downgrade, select emerging markets bond funds could be in for more downside. The Market Vectors LatAm Aggregate Bond ETF (NYSE: <a class="ticker" href="/stock/bono#NYSE">BONO</a>) has 59 percent allocation to dollar-denominated holdings, but bonds denominated it Brazilian real account for 7.8 percent of the ETF's weight. Brazil is 20.8 percent of BONO's country weight.

	BONO has lost almost seven percent in the past month. The iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) is another bond ETF to monitor. That ETF devotes allocates 12.3 percent of its weight real-denominated issues and is off almost eight percent in the past month.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Analyst Color

Downgrades

Events

Analyst Ratings

BONO

SCIF

More Bad News For Brazil ETFs: June Edition

Here is the ETF Professor's ETF Watch List for Thursday, May 16, 2013.

The WisdomTree Japan Hedged Equity Fund (NYSE: <a class="ticker" href="/stock/dxj#NYSE">DXJ</a>) should be in play.

Give the Consumer Staples Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlp#NYSE">XLP</a>).

Try mid-caps with the WisdomTree MidCap Dividend Fund (NYSE: <a class="ticker" href="/stock/don#NYSE">DON</a>).

Emerging markets plays of the day: Guggenheim China Small-Cap ETF (NYSE: <a class="ticker" href="/stock/hao#NYSE">HAO</a>), iShares MSCI Taiwan ETF (NYSE: <a class="ticker" href="/stock/ewt#NYSE">EWT</a>) and the WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE: <a class="ticker" href="/stock/dgs#NYSE">DGS</a>).

Forex play of the day: CurrencyShares Canadian Dollar Trust (NYSE: <a class="ticker" href="/stock/fxc#NYSE">FXC</a>).

Bond play of the day: iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>).

Pre-Market Outlook

Wisdomtree Emerging Markets Smallcap Dividend Fund

WisdomTree Trust Japan Total Dividend Fund

ETFs to Watch May 16, 2013 (DXJ, HAO, XLP)

Invesco's (NYSE: <a class="ticker" href="/stock/ivz#NYSE">IVZ</a>) PowerShares unit, the fourth-largest U.S. ETF issuer, is slated to introduce the PowerShares Fundamental Emerging Markets Local Debt Portfolio (NYSE: PFEM) on Thursday.

	The PowerShares Fundamental Emerging Markets Local Debt Portfolio, which will charge an annual expense ratio of 0.5 percent, enters a corner of the ETF market <a href="http://www.benzinga.com/markets/bonds/13/03/3392195/market-vectors-em-bond-etf-tops-1-5b-in-aum">fraught with competition</a>.

	The new PowerShares ETF will tussle with popular emerging markets local currency bond funds such as the WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>). ELD is the second-largest actively managed ETF with $2.05 billion in assets under management.

	Other popular emerging markets bond funds with holdings denominated in local currencies include the $1.5 billion Market Vector Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>) and the $645.3 million iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>).

	The new PowerShares fund will track a Research Affiliates index, the Citi RAFI Bonds Sovereign Emerging Markets Extended Local Currency Index, which screens constituents on the following factors: GDP, population, land area and energy use, <a href="http://www.indexuniverse.com/hot-topics/18671-powershares-to-launch-local-em-bond-etf.html">according to Index Universe</a>.

	PowerShares currently offers several ETFs based on fundamentally-weighted indexes provided by Research Affiliates, including the $1.82 billion PowerShares FTSE RAFI US 1000 Portfolio (NYSE: <a class="ticker" href="/stock/prf#NYSE">PRF</a>) and the $381.6 milllion PowerShares FTSE RAFI Emerging Markets Portfolio (NYSE: <a class="ticker" href="/stock/pxh#NYSE">PXH</a>).

	PowerShares already has a sizable footprint in the emerging markets bond ETF arena with the U.S. dollar-denominated PowerShares Emerging Markets Sovereign Debt Portfolio (NYSE: <a class="ticker" href="/stock/pcy#NYSE">PCY</a>). That ETF has $2.64 billion in assets.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

PowerShares Emerging Markets Sovereign  Portfolio

PowerShares Exchange Traded Fund FTSE RAFI US 1000 Portfolio

PowerShares EM Local Currency Debt ETF Debuts Thursday

Shares of the iShares MSCI Philippines Investable Market Index Fund (NYSE: <a class="ticker" href="/stock/ephe#NYSE">EPHE</a>) are up about 2.4 percent Wednesday and the ETF is flirting with its all-time high after Fitch Ratings became the first major ratings agency to bestow an investment-grade credit rating on the Southeast Asian nation.

	Fitch upgraded the Philippines' long-term, foreign currency-denominated debt to BBB- from BB and the long-term local currency-denominated debt to BBB from BBB with stable outlooks on both ratings. Fitch cited the Philippines' strong sovereign external balance and persistent current account surplus, <a href="http://www.washingtonpost.com/business/fitch-ratings-upgrades-philippines-to-investment-grade-first-ever-for-the-se-asian-nation/2013/03/27/3d4ff88c-96b9-11e2-8672-ea4d5806079b_story.html">the Associated Press reported</a>.

	The move by Fitch is not surprising. Over a year ago, Benzinga reported <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/03/3417591/cappt-2013s-top-performing-em-etf-acronym">the Philippines was a credible candidate among developing nations</a> to see an increased credit rating. The country would proceed to shatter estimates by delivering 2012 GDP growth of 6.6 percent.

	Last June, Standard &amp; Poor's finally got around to raising the country's long-term foreign currency-denominated debt to BB+ from BB, the highest rating since 2003. The new rating is just one notch below investment grade and it is the same rating S&amp;P has on Indonesia, Southeast Asia's largest economy. The move by S&amp;P followed Moody's Investors Service raising its outlook to positive on the Philippines in May 2012.

	Following those moves, it was reported that the Philippines <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/07/2723917/debt-free-future-buoys-the-case-for-philippines-etf#ixzz2Okqh4JdZ">could be debt-free in a few years</a> due to its strong government balance sheet and booming business process outsourcing business.

	Due to a workforce that is highly educated and chock full of proficient English speakers relative to other developing economies, the Philippines has surpassed India as the top destination for global call centers. Business process outsourcing could be a $25 billion industry in the Philippines by 2016, bolstering the thesis that the country is not as dependent on exports to China as some believe. In fact, in the first half of last year, <a href="http://www.benzinga.com/markets/bonds/12/12/3175050/can-the-philippines-etf-keep-up-its-torrid-pace-in-2013">China was well behind Japan and the U.S.</a> in terms of top destinations for Philippines exports.

	Hot Money? Not Really 
	As EPHE soared in 2012, a run that made it one of the best-performing emerging markets ETFs, plenty of chatter started that the ETF was becoming a destination for hot money, or speculators that would only stick around for quick profits. Statistics indicate that is not the reality.

	While many of the marquee developing nations disappointed investors, either in terms of GDP growth, ETF returns or both, EPHE emerged as a credible and more profitable alternative to the funds tracking the likes of Brazil and India. In July 2012, EPHE had just over $142 million in assets under management, but the number surged to <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/11/3127120/philippines-etf-flirts-with-highs-following-gdp-report">$171.5 million by late November</a>. 
	Destroying the theory that the ETF is a hot money destination is that it is now home to nearly $398 million in assets. Even without the benefit of the Fitch investment-grade move, EPHE was up 13.4 percent year-to-date heading into the start of trading today. That simply blows away the returns offered by the four major ETFs tracking the BRIC nations as well as diversified emerging markets ETFs such as the Vanguard FTSE Emerging Markets ETF (NYSE: <a class="ticker" href="/stock/vwo#NYSE">VWO</a>) and the iShares MSCI Emerging Markets Index Fund (NYSE: <a class="ticker" href="/stock/eem#NYSE">EEM</a>).

	Bonds, Too 
	The investment-grade rating will help lower borrowing costs for the Philippines and likely make the country's sovereign debt more attractive to foreign investors. On the downside, yields on Philippine sovereigns have been tumbling in anticipation of an investment-grade rating and downside from here may be limited.

	Investors looking to get some exposure to Philippine bonds can consider some already well-known ETFs. The WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>), the second-largest actively managed ETF, has an almost 3.7 percent weight to the Philippines. The WisdomTree Asia Local Debt Fund (NYSE: <a class="ticker" href="/stock/ald#NYSE">ALD</a>), also actively managed, has a 5.7 weight to the country. Both ETFs hold issues denominated in Philippine pesos.

	Another local currency offering to consider is the iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>), which currently has a 4.8 percent weight to the Philippines. Those looking for dollar-denominated debt exposure to the Philippines should consider the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSE: <a class="ticker" href="/stock/pcy#NYSE">PCY</a>).

	PCY allocates almost 4.4 percent of its weight to the Philippines and while that may not sound like much, the largest country weight in that ETF is Sri Lanka at 4.5 percent, so it is fair to say the Philippines does figure prominently in PCY.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Upgrades

Philippines ETF Soars on First Investment-Grade Rating

Here is the ETF Professor'S ETF Watch List for Thursday, March 21, 2013.

The iShares Dow Jones US Financial Services Index Fund (NYSE: <a class="ticker" href="/stock/iyg#NYSE">IYG</a>) continues to impress.

Small-cap play: PowerShares Fundamental Pure Small Value Fund (NYSE: <a class="ticker" href="/stock/pxsv#NYSE">PXSV</a>).

Keep an eye on the Health Care Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlv#NYSE">XLV</a>) as it attempts to break resistance.

Emerging markets plays of the day: Market Vectors Vietnam ETF (NYSE: <a class="ticker" href="/stock/vnm#NYSE">VNM</a>), iShares MSCI All Peru Capped Index Fund (NYSE: <a class="ticker" href="/stock/epu#NYSE">EPU</a>) and the iShares S&amp;P Latin America 40 Index Fund (NYSE: <a class="ticker" href="/stock/ilf#NYSE">ILF</a>).

Currency play of the day: PowerShares DB G10 Currency Harvest ETF (NYSE: <a class="ticker" href="/stock/dbv#NYSE">DBV</a>).

Bond play of the day: iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>).

iShares Trust S&P Latin America 40 Index Fund

iShares Trust Dow Jones US Financial Services Index Fund

PXSV

ETFs to Watch March 21, 2013 (IYG, XLV, LEMB)

Mutual fund giant Fidelity and BlackRock's (NYSE: <a class="ticker" href="/stock/blk#NYSE">BLK</a>) iShares unit, the world's largest ETF sponsor, announced today that Fidelity will more than double the amount of iShares ETFs it offers to its clients on a commission-free basis to 65 funds.

The two firms have a commission-free ETF partnership that dates back to early 2010 when the Fidelity announced it would offer 26 iShares ETFs commission-free. That number was raised to 30 iShares <a href="http://www.benzinga.com/11/02/867736/fidelity-increases-commission-free-etfs-to-31">in early 2011</a>.

The full, expansive list of iShares ETFs available on a commission-free basis to Fidelity clients <a href="https://www.fidelity.com/etfs/ishares-view-all">can be seen here</a>. Among the 65 iShares ETFs Fidelity clients can trade (sans commissions) are popular bond, broad market and emerging markets funds, as well more targeted offerings.

The list of iShares ETFs in the Fidelity commission-free stable include the iShares Core MSCI Emerging Markets ETF (NYSE: <a class="ticker" href="/stock/iemg#NYSE">IEMG</a>), the iShares J.P. Morgan USD Emerging Markets Bond Fund (NYSE: <a class="ticker" href="/stock/emb#NYSE">EMB</a>), the iShares Barclays TIPS Bond Fund (NYSE: <a class="ticker" href="/stock/tip#NYSE">TIP</a>), the iShares Core S&amp;P 500 ETF (NYSE: <a class="ticker" href="/stock/ivv#NYSE">IVV</a>), the iShares Core Total U.S. Bond Market ETF (NYSE: <a class="ticker" href="/stock/agg#NYSE">AGG</a>), the iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>), the iShares MSCI China Index Fund (NYSE: <a class="ticker" href="/stock/mchi#NYSE">MCHI</a>), the iShares Russell Micro-Cap Index Fund (NYSE: <a class="ticker" href="/stock/iwc#NYSE">IWC</a>), the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>), the iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) and the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/lqd#NYSE">LQD</a>).

Fidelity, which has filed plans with the Securities and Exchange Commission to offer its own ETFs, said expanding its partnership with iShares <a href="http://finance.yahoo.com/news/fidelity-expands-etf-partnership-blackrock-133403780.html">is not a reaction to recent news from</a> Charles Schwab (NYSE: <a class="ticker" href="/stock/schw#NYSE">SCHW</a>).

Last month, Schwab, the largest discount broker, unveiled its Schwab ETF OneSource Platform that allows clients to trade <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/02/3314763/schwab-unveils-massive-additions-to-commission-free-etf-lineu">105 ETFs from various issuers commission-free</a>. In addition to its own ETFs, Schwab offers State Street Global Advisors, PowerShares and Guggenheim funds, among others, commission-free.

TD Ameritrade (NASDAQ: <a class="ticker" href="/stock/amtd#NASDAQ">AMTD</a>) offers over 100 ETFs commission-free as well, <a href="http://research.tdameritrade.com/grid/public/etfs/commissionfree/commissionfree.asp">including some iShares funds</a>. E*Trade (NASDAQ: <a class="ticker" href="/stock/etfc#NASDAQ">ETFC</a>) and Vanguard are among the other firms that offer commission-free ETF trading to their clients.

For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

AMTD

ETFC

IEMG

MCHI

SCHW

Fidelity, iShares Boost Commission-Free ETF Lineup

Pacific Investment Management Co.'s Bill Gross has a <a href="http://www.benzinga.com/markets/bonds/13/01/3267133/got-pesos-use-these-etfs-for-attractive-mexican-bonds">well-documented affinity for Mexican debt and the country's currency, the peso</a>. 

With that sentiment being widely known throughout global bond markets, that might be the reason more bullish comment from Gross about the Mexican peso are not doing much today to lift ETFs that are heavy on Mexican bonds.

On Tuesday, Gross, founder of PIMCO, took to Twitter to praise Mexico's <a href="http://www.bloomberg.com/news/2013-02-05/mexico-peso-advances-as-pimco-s-gross-supports-great-currency-.html">low debt levels and stability in its target lending rate</a>. 

Peso fondness is nothing new from Gross. Last year, the bond manager <a href="http://www.benzinga.com/markets/bonds/12/06/2702422/etfs-bill-gross-might-like-bono-hdv-pbj">said investors should favor</a> "clean dirty shirt' sovereigns (U.S., Mexico and Brazil)."

Still, Gross reiterating his bullish view of the Mexican currency is not doing much today to help those ETFs that feature noticeable allocations to Mexican debt. Of that group, only the Market Vectors LatAm Aggregate Bond ETF (NYSE: <a class="ticker" href="/stock/bono#NYSE">BONO</a>) is trading higher today and only modestly so. 

The unheralded BONO has a 14.5 percent weight to peso-denominated Mexican sovereign debt. BONO has an average modified duration of 5.89 years and a 30-day SEC yield of 4.71 percent. 

The iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) is trading slightly lower today. That ETF features a 7.41 percent weight to peso-denominated bonds, but investors should note South Korea and Brazil dominate this ETF, combing for 34 percent of its weight.

Those looking exposure to Mexican bonds without a full regional commitment to Latin America can consider the WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>). ELD, the second-largest actively managed ETF on the market today, allocates about 10.6 percent of its weight to peso-denominated bonds making the peso the ETF's largest currency holding. About 88 percent of ELD's holdings are rated investment-grade. ELD is off a quarter of a percent today.

On above average turnover, the SPDR Barclays Emerging Markets Local Bond ETF (NYSE: <a class="ticker" href="/stock/ebnd#NYSE">EBND</a>) is lower by nearly 0.7 percent, making it Wednesday's worst offender of the Mexico bond ETFs mentioned here. Mexico is EBND's third-largest country at nearly nine percent, trailing Brazil and South Korea.

South Korea could be the issue with EBND and LEMB today because on Tuesday the country's Financial Supervisory Service said foreign investors pulled $2.59 billion out of the country's financial markets last month, the highest level since December 2011, <a href="http://www.reuters.com/article/2013/02/04/korea-economy-foreign-funds-idUSL4N0B43ZI20130204">Reuters reported</a>.

For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Gross Peso Tweet Not Doing Much For EM Bond ETFs

Emerging markets bonds, even the investment-grade issues, share a couple of things in common with junk bonds. Of course, both are prized for yields that are superior to developed markets government debt. Both were among investors' <a href="http://www.benzinga.com/markets/bonds/12/11/3120114/another-emerging-market-bond-etf-sees-assets-soar">most favored bond ETF destinations in 2012</a>.

The similarities do not end there. Albeit to a less extent than U.S. high-yield corporates, emerging markets bonds are dealing with bubble talk. Plug the phrase "emerging markets bond bubble" into Google <a href="https://www.google.com/#hl=en&amp;sugexp=les%3B&amp;gs_rn=1&amp;gs_ri=hp&amp;tok=3NCRLTc1Mxk1jGMxE1hm-g&amp;cp=24&amp;gs_id=7e&amp;xhr=t&amp;q=emerging+markets+bond+bubble&amp;es_nrs=true&amp;pf=p&amp;tbo=d&amp;sclient=psy-ab&amp;oq=emerging+markets+bond+bu&amp;gs_l=&amp;pbx=1&amp;bav=on.2,or.r_gc.r_pw.r_qf.&amp;bvm=bv.41248874,d.cGE&amp;fp=365e1585d5b3f592&amp;biw=1366&amp;bih=649">and nearly 1.7 million results are returned in less than a third of a second</a>.

That does not mean there are no more opportunities with developing markets debt. Quite the contrary in the eyes of one portfolio manager. <a href="http://www.benzinga.com/markets/bonds/12/05/2565731/the-definitive-guide-to-non-usd-em-bond-etfs">Non-dollar denominated issues could represent the best opportunities</a> for bond investors this year.

"That is a positive part of the value proposition we today – emerging markets currencies are not undergoing the same monetary experiment that could lead to a debasement of the world's reserve currencies," said Market Vectors portfolio manager Fran Rodilosso. 

Dollar-denominated emerging markets bond ETFs not only soared in terms of returns last year, two of this sub-segment's largest funds also surged in popularity with investors. The PowerShares Markets Sovereign Debt ETF (NYSE: <a class="ticker" href="/stock/pcy#NYSE">PCY</a>) is up about 15.3 percent in the past year and has seen its assets under management total jump <a href="http://www.invescopowershares.com/products/overview.aspx?ticker=PCY">to almost $3.1 billion as of January 18</a> from $2.5 billion in early November 2012.

The rival iShares J.P. Morgan USD Emerging Markets Bond Fund (NYSE: <a class="ticker" href="/stock/emb#NYSE">EMB</a>) has returned nearly 12 percent in the past year. EMB had $6.2 billion in AUM in early November, but that number is now north of $7 billion.

Amid rampant developed market monetary easing and currency debasement, this year could be different for dollar-denominated bonds.

"The first step for investors is to realize that many traditional fixed income investments are not likely to deliver the same types of returns we saw in 2012," said Rodilosso in a statement. 

"Although one approach some investors might apply this year is to add leverage, doing so has often proven to be a perilous proposition. Instead, I believe the time may be right to consider emerging markets destinations that offer more attractive yields on top of currency and credit fundamentals that appear to me to be on much more solid footing than the U.S. dollar, euro or yen investments."

Rodilosso is the portfolio manager for the popular Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>), so some might argue that his preference for non-dollar developing world bonds should be taken with a grain of salt. However, there is no denying that ETFs such as EMLC have caught investors' attention.

EMLC, which has a 30-day SEC yield of 4.76 percent, crossed the $1 billion in AUM mark in the fourth quarter and now has $1.27 billion in AUM, <a href="http://vaneck.com/funds/EMLC.aspx">according to Market Vectors data</a>. Importantly, this fund and others like it do not represent significant increases in credit risk. For example, nearly 60 percent of EMLC's holdings carry investment-grade ratings. 

Brazil, Poland, South Africa and Mexico each receive allocations of 10 percent in EMLC. The ETF has gained almost nine percent in the past year. Rodilosso noted that the J.P. Morgan GBI-EMG Core Index (GBIEMCOR), EMLC's underlying index, rebalanced to include Nigeria at the end of last year. Africa's largest oil producer now receives a three percent weight in EMLC. Romania is now eligible for inclusion and Romanian debt will begin entering the index on March 1st, according to the portfolio manager.

Other local currency funds have proven adept at attracting investors' cash. The iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/11/3111740/em-bond-etf-sees-amazing-inflows">had $207 million in AUM at the end of October</a>, but that total now stands at $405.4 million. South Korean and Brazilian issues combine for 34 percent of LEMB's weight and the bulk of the fund's 80 holdings garner investment-grade ratings from Moody's Investors Service.

Even with the soaring inflows to local currency funds, Rodilosso still sees money managers as under-allocated to the space and that could spell more upside for these funds this year as more professional investors warm to the ideas of emerging markets' significantly lower debt-to-GDP ratios, fiscal deficits and higher interest rates.

"It is still my belief that global asset managers remain under-allocated when it comes to local currency emerging markets debt," he said. "Perhaps this is due to some investors' tendencies to associate emerging markets in general with past boom/bust cycles. Add to that the fact that the relative strength of emerging markets may in itself be something that many investors are finding difficult to digest, let alone believe in enough to allocate significant capital, and that may very well be why we're seeing value remaining in these markets."

Other ETF ideas in the local currency emerging markets space include the WisdomTree Asia Local Debt ETF (NYSE: <a class="ticker" href="/stock/ald#NYSE">ALD</a>), <a href="http://www.benzinga.com/markets/bonds/13/01/3229035/this-local-debt-etf-is-an-economic-growth-play">which tracks a region with some of the emerging world's</a> best growth prospects for 2013. 

Rodilosso also serves as the manager for the MarkVectors Fallen Angel High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/angl#NYSE">ANGL</a>), the Market Vectors Emerging Markets High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/hyem#NYSE">HYEM</a>) and the Market Vectors Renminbi Bond ETF (NYSE: <a class="ticker" href="/stock/chlc#NYSE">CHLC</a>), among others.

For more on ETFs, click <a href="www.benzinga.com/etfs">here</a>.

ANGL

CHLC

HYEM

Rodilosso Says Opportunities Remain in EM Bonds

Amid lingering concerns about slowing global economic growth, one of the 2012's most prominent ETF themes has the potential to keep thriving in 2013. That theme being the <a href="http://www.benzinga.com/markets/bonds/12/12/3192140/these-etfs-have-seen-jaw-dropping-aum-growth-in-december">soaring popularity of emerging markets local currency bond ETFs</a>.

ETFs such as the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>), iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) and the actively managed WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>) were home to impressive gains in assets under management last year as investors sought out the stronger currencies and government balance sheets offered by some developing markets.

Those funds are diverse at the country and region levels. For example, ELD, which has over $1.6 billion in AUM making it the second-largest actively managed ETF on the market today, spreads its country allocations between Asia, Africa, Europe, Latin America and the Middle East. In 2013, some investors may want to consider a more focused bet on bonds issued in local emerging markets currencies.

"As investors adjust their portfolios to account for potentially lower levels of output growth in 2013, many might consider a greater allocation to countries that, as a region, are currently growing at the fastest pace globally," <a href="http://www.wisdomtree.com/blog/index.php/capitalizing-on-economic-growth-asia-local-debt/?elqCampaignId=268">said WisdomTree Portfolio Manager Rick Harper</a> in a research note. 

Harper continued: "After a year that has seen modest regional currency underperformance compared to Emerging Europe and Latin America due to concerns about a prolonged slowdown in China, 2013 could provide a positive backdrop for Asian outperformance as investors shrug off earlier economic concerns. When focusing on fundamentals, we believe the prospects for Asia are indeed some of the brightest across the developed as well as the emerging markets."

Investors can easily tap into the theme of strong Asian currencies through the WisdomTree Asia Local Debt Fund (NYSE: <a class="ticker" href="/stock/ald#NYSE">ALD</a>). ALD, which will celebrate its second birthday in March, is home to $458 million in AUM. That makes it one of the largest actively managed ETFs.

Importantly, ALD has gained about 7.3 percent in the past year and the fund pays a monthly dividend, adding to its allure for income investors looking for some non-dollar or international exposure.

More importantly are the facts that ALD's constituent currencies are arguably undervalued and carry higher interest rates than what can be found in much of the developed world.

"Currently, interest rates are approximately three times higher in Asia than in many developed markets (providing a distinct carry advantage)," said Harper. "While higher interest rates have attracted some investors, these countries' projected growth rates lead many economists to call for continued appreciation of their currencies against the U.S. dollar. On average, currencies in ALD are undervalued compared to their long-term purchasing power by 18%."

With expectations firmly in place for the Federal Reserve, the Bank of Japan and other developed market central banks to continue engaging currency-depressing easing programs, higher-yielding Asian currencies become all the more attractive. 

Regarding ALD, the ETF is not as risky either at the credit level or the country level as some investors may think. With Singapore, Australia and New Zealand combing for almost 28 percent of ALD's weight, the fund offers significant developed markets exposure. At the credit level, roughly two-thirds of the fund's holdings are rated AAA, AA or A. 

Other country weights include South Korea, Thailand, Malaysia, Indonesia, the Philippines, China, Taiwan and Hong Kong.

For more on local currency bond ETFs, click <a href="http://www.benzinga.com/markets/bonds/12/12/3154114/local-currency-em-bonds-face-the-fiscal-cliff">here</a>.

Dividends

This Local Debt ETF is an Economic Growth Play

In a new blog post, Dodd Kittsley, Head of Global ETP Market Trends Research for BlackRock (NYSE: <a class="ticker" href="/stock/blk#NYSE">BLK</a>), identifies four prominent trends the exchange-traded products industry could see in 2013. One of the trends, <a href="http://isharesblog.com/blog/2012/12/26/4-etp-trends-for-2013/">that being double-digit asset growth</a> for the industry at large, is a broader theme. Isolating individual ETFs and ETNs that can benefit from industry-wide asset growth is tricky.

However, the three other trends Kittsley highlights can easily be exploited through individual ETFs. That list starts with...

Robust Interest in Bond Funds
This is an extension of a prominent 2012 theme. As <a href="http://www.benzinga.com/news/12/12/3160109/etf-inflows-on-record-pace-in-2012-says-morningstar">Morningstar noted earlier this month</a>, U.S. bond ETFs hauled in $3.8 billion in inflows in November to bring the year-to-date total through the end of November to $48 billion.

"Bond ETPs account for 31% of all year-to-date industry flows, up from 12% in 2008," said Kittsley.

If a fiscal cliff resolution is not passed before the January 1, 2013 deadline, investors could flee stocks and equity-based ETFs for the comfort of bond funds. The PIMCO Total Return Bond ETF (NYSE: <a class="ticker" href="/stock/bond#NYSE">BOND</a>), which has been the most successful new product launch of 2012, has the advantage of being known as the "Bill Gross ETF." That could spark inflows in a turbulent environment for stocks and other risky assets.

Assuming 2013 starts on a risk off note, that could cap upside for high-yield bond funds, but investors' need for yield is not likely to diminish. That could make the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/lqd#NYSE">LQD</a>) attractive. 

Another ETF to consider is the WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ: <a class="ticker" href="/stock/emcb#NASDAQ">EMCB</a>). With over $96.2 million in AUM, EMCB is a successful 2012 ETF launch in its own right. Roughly 70 percent of the fund's holdings are rated investment-grade and the ETF has a 30-day SEC yield of 3.61 percent, 85 basis points higher than LQD's 30-day SEC yield.

Increased Use of Volatility Products
Again, this is an extension <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/08/2805967/the-definitive-guide-to-low-volatility-etfs">of a 2012 theme</a>. Arguably, the volatility ETF movement kicked off in 2011 with the debut of the PowerShares S&amp;P 500 Low Volatility Portfolio (NYSE: <a class="ticker" href="/stock/splv#NYSE">SPLV</a>). 

SPLV is now the gold standard of volatility ETFs with almost $3.1 billion in assets under management and this ETF's success has sparked a wave of new product introductions aimed at capturing share in a market segment that has proven wildly popular with investors.

Other low volatility ETFs that could see strong inflows in the new year include the PowerShares S&amp;P 500 High Dividend Portfolio (NYSE: <a class="ticker" href="/stock/sphd#NYSE">SPHD</a>), which debuted just two months ago and already has $28 million in AUM. SPHD is home to 50 stocks "traded on the S&amp;P 500 Index that historically have provided high dividend yields and low volatility," <a href="http://www.invescopowershares.com/products/overview.aspx?ticker=SPHD">according to PowerShares</a>. That gives the ETF a 30-day SEC yield of 4.74 percent.

Investors looking to put the "low vol" theme to work for them <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/11/3076528/low-vol-em-etf-continues-to-impress-with-aum-gains">in the emerging markets</a> have choices as well. Given the rapid success of the iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSE: <a class="ticker" href="/stock/eemv#NYSE">EEMV</a>), which has attracted $840 million in AUM in just 14 months of trading, it would not be surprising to see more inflows to this sub-sector of the low vol ETF universe. 

An alternative to EEMV is the PowerShares S&amp;P Emerging Markets Low Volatility Portfolio (NYSE: <a class="ticker" href="/stock/eelv#NYSE">EELV</a>). EELV debuted in January and spent several months living a fairly anonymous existence. Over the last few months, however, investors have woken up to EELV's story and the fund's AUM total has jumped to $87.4 million.

More Inflows For EM Bond Funds
"In 2012, demand for this class of ETPs doubled to $20 billion. The category now accounts for 6% of the fixed income ETP universe, up from less than 2% going into 2010," according to Kittsley.

Indeed, it feels like hardly a week has passed in 2012 <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/11/3111740/em-bond-etf-sees-amazing-inflows">without news of another emerging markets bond ETF seeing remarkable inflows</a>. Of course, this has sparked the predictable talk a bubble in emerging markets bonds.

Part of the bubble talk revolves around the fact that companies in the developing world issued <a href="http://online.wsj.com/article/BT-CO-20121218-707850.html">$258 billion in corporate debt this year</a>. That is more than double last year's level, according to the Wall Street Journal. The problem with calling that a bubble is that the appetite is there on the part of global investors to absorb new issuance in 2013 a rate similar to what was seen this year. 

The aforementioned WisdomTree Emerging Markets Corporate Bond Fund should benefit from increased appetite for EM corporate debt. Risk takers can consider the Emerging Markets High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/hyem#NYSE">HYEM</a>), which features dollar-denominated junk bonds from developing world corporate issuers.

Of course, it cannot be forgotten that ETFs tracking emerging markets sovereign debt have longer track records than their corporate counterparts and have been inflow leaders this year. Sovereign debt issuance in the developing world has also been high this year at $85 billion, but that has not been the primary reason investors have embraced this asset class.

The biggest reason why inflows to dollar-denominated ETFs such as the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSE: <a class="ticker" href="/stock/pcy#NYSE">PCY</a>) have been so robust is yield. PCY offers a 30-day SEC yield of 3.92 percent with the comfort of a dollar-based asset and the potential for capital appreciation as more developing nations see their sovereign ratings boosted.

Not to be left out of the equation are ETFs that give investors exposure to bonds denominated in local currencies. This group includes the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>), the iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) and the actively managed WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>).

Local currency debt accounted for 85 percent of the total emerging markets bond market in 2011, <a href="http://www.ft.com/intl/cms/s/0/56cb690e-c6a8-11e1-963a-00144feabdc0.html#axzz2GHTHV0sG">according to the Financial Times</a> and investor interest in local currency bonds continues to increase as some developing nations sport better balance sheets than their developed world counterparts.

Local currency bond ETFs have also held up well in the face of the fiscal cliff. Led by EMLC's 2.33 percent gain, all three of the local currency bond funds mentioned here are up since November 7.

For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

BOND

EELV

EEMV

EMCB

SPHD

PowerShares S&P 500 Low Volatility Portfolio

SPLV

How to Play 2013's Top ETF Trends

Exchange traded funds raked in $15.6 billion in fresh investments last month as bond funds continued to be asset-gathering leaders. Year-to-date ETFs have attracted $154 billion in new assets, putting the industry on pace to eclipse the 2008 record, <a href="http://news.morningstar.com/articlenet/article.aspx?id=577734">according to Morningstar (NASDAQ: </a><a class="ticker" href="/stock/morn#NASDAQ">MORN</a>). In 2008, ETFs hauled in $168.3 billion in assets.

Bond funds continue to impress. Inflows to the group totaled $3.8 billion last month and stand at $48 billion, "surpassing any previous year," Morningstar analyst Michael Rawson said in a note.

Not surprisingly, the PIMCO Total Return ETF (NYSE: <a class="ticker" href="/stock/bond#NYSE">BOND</a>), which debuted earlier this year, has been the leader among bond ETF inflows this year. Colloquially known as the Bill Gross ETF, BOND raked in $450 in fresh investments last month and is on pace to top $4 billion in AUM this year, Morningstar noted. BOND is now the largest actively managed ETF and the second to top $1 billion in AUM. The first was the WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>).

Speaking of emerging markets bond ETFs, the Morningstar data is supportive of an often discussed topic: Surging <a href="http://www.benzinga.com/markets/bonds/12/11/3120114/another-emerging-market-bond-etf-sees-assets-soar">inflows to this asset class</a>. ETFs tracking emerging markets debt attracted $774 million in assets last month to bring the year-to-date total to $5.4 billion. 

Inflow leaders among <a href="http://www.benzinga.com/markets/bonds/12/12/3156513/10-for-13-bond-etfs-for-the-new-year">emerging markets bond ETFs this year</a> are spread across the group and include dollar-denominated funds such as the PowerShares Emerging Mearkts Sovereign Debt Portfolio (NYSE: <a class="ticker" href="/stock/pcy#NYSE">PCY</a>), the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>) and the iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>).

Morningstar noted emerging markets ETFs, including funds ranging from the iShares MSCI Emerging Markets Index Fund (NYSE: <a class="ticker" href="/stock/eem#NYSE">EEM</a>) to the iShares FTSE China 25 Index Fund (NYSE: <a class="ticker" href="/stock/fxi#NYSE">FXI</a>) to the WisdomTree India Earnings ETF (NYSE: <a class="ticker" href="/stock/epi#NYSE">EPI</a>), were on the receiving end of robust inflows in November. As a group, diversified emerging markets funds such as EEM attracted over $1.8 billion in assets last month.

Investors continue to <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/11/3076528/low-vol-em-etf-continues-to-impress-with-aum-gains">low volatility ETFs as well</a>. Morningstar points out the iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSE: <a class="ticker" href="/stock/eemv#NYSE">EEMV</a>) attracted $86 million in fresh assets in November. The PowerShares S&amp;P 500 Low Volatility (NYSE: <a class="ticker" href="/stock/splv#NYSE">SPLV</a>), already the largest low volatility equity ETF by assets, gained $352 million in assets last month.

Among issuers, the big three of iShares, State Street Global Advisors and Vanguard were the big three in terms of inflows last month. Year-to-date, iShares ETFs have gained $47.2 billion in assets, putting the firm just ahead of Vanguard's $46.8 billion in inflows, according to Morningstar data. State Street Global Advisors, the second-largest U.S. ETF sponsor in between iShares and Vanguard, has attracted $23.7 billion in new investments this year.

For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

MORN

ETF Inflows on Record Pace in 2012, Says Morningstar 

One of the biggest themes in the ETF universe in 2012 has been the impressive accumulation of assets by bond funds. Through the first 10 months of 2012, all bond ETFs, U.S-listed and those trading outside the U.S., raked in $114 billion in new assets. 

U.S. funds did the bulk of the work, attracting $52.8 billion through the end of October, <a href="http://eng.fundsamericas.com/news/etf/9714/Equity-ETF-and-ETP-Investors-Increase-Exposure-to-Emerging-Markets-6-Fold-in-2012?goback=.gde_110203_member_193543466">according to Funds America</a>. That means bond funds are 2012's top asset gatherers among ETFs, putting the asset class well ahead of the almost $36.7 billion hauled in by U.S.-listed emerging markets ETFs.

With fears of the fiscal cliff high and expectations from some market observers that 2013 could be another bumpy year for stocks, it is reasonable to expect bond ETFs as a group will remain proficient at gathering assets. These 10 bond ETFs could help investors weather potential storms while generating income in the year ahead. In no particular order...

PIMCO Total Return ETF (NYSE: <a class="ticker" href="/stock/bond#NYSE">BOND</a>)
Perhaps the worst thing that can be said of the PIMCO Total Return ETF, colloquially known as the "Bill Gross ETF," is that the fund's success is not surprising. Really, did anyone expect an ETF with the bond king's name attached to it to be a flop? 

A flop BOND is not. Since its February 29 inception date, BOND has accumulated <a href="http://www.pimcoetfs.com/Funds/Pages/BOND.aspx">$3.83 billion in assets under management</a>, making it the largest actively managed ETF by a wide margin. More important that superficial statistic is performance. BOND has delivered the goods there as well as the ETF has gained nearly 12 percent since its debut..

iShares Core Total U.S. Bond Market ETF (NYSE: <a class="ticker" href="/stock/agg#NYSE">AGG</a>)
The iShares Core Total U.S. Bond Market ETF, previously the iShares Barclays Aggregate Bond Fund, makes this list for fans of ETF competition. Not only does the fund offer investors a passively managed equivalent to BOND, it is locked in a serious battle with the Vanguard Total Bond Market ETF (NYSE: <a class="ticker" href="/stock/bnd#NYSE">BND</a>).

In fact, it is BND's paltry expense ratio of 0.1 percent that likely prompted AGG's own fee reduction to 0.08 percent. Whether or not Vanguard responds and cuts BND's fees next year remains to be seen. Also interesting will be whether or not investors embrace the low fees of AGG and BND over the allure of BOND's active management. The PIMCO offering charges 0.55 percent per year.

PowerShares Emerging Markets Sovereign Debt Portfolio (NYSE: <a class="ticker" href="/stock/pcy#NYSE">PCY</a>)
If surging bond ETF inflows represent a theme, then a sub-theme is soaring assets under management totals for emerging markets debt funds. That theme <a href="http://www.benzinga.com/markets/bonds/12/12/3156036/seasonal-trends-for-em-bonds">has been obvious throughout 2012</a> and the PowerShares Emerging Markets Sovereign Debt Portfolio has been a prime beneficiary.

Not only is PCY large with over $3 billion in AUM, it is a compelling option for income for investors for several reasons. First, is the 30-day SEC yield almost four percent. Second, is the monthly dividend. Third, most of PCY's holdings are rated investment grade, so investors are not taking on significant credit risk with this fund. 

Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>)
Sticking with the theme of emerging markets bond ETFs, EMLC represents a fine option for the investor looking to gain exposure to non-dollar asset classes. EMLC and rival funds have shown investors <a href="http://www.benzinga.com/markets/bonds/12/12/3154114/local-currency-em-bonds-face-the-fiscal-cliff">improving credit quality and health balance sheets</a> in the emerging world can translate to solid returns.

EMLC, the WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>) and the iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) have all traded noticeably higher in 2012. All three have been prodigious gainers of new assets. If 2013 turns out to be a risk on year, those trends should continue for these ETFs.

SPDR Barclays Capital High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>)
Just some folks writing off junk bond ETFs, JNK and rivals such as the iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) look to be closing 2012 on a strong note and are flirting with 52-week highs. HYG and JNK are favorite tools for gauging risk appetite because some pros view these ETFs as trading in comparable fashion to stocks.

Savvy traders keep an eye on JNK because its tracking error relative to its index is looser (worse) than HYG's. That means in lieu of a heavily traded inverse junk bond ETF (there is one, though it is thinly traded), traders that want to short junk bonds often short JNK.

Market Vectors International High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/ihy#NYSE">IHY</a>)
If there is superficial problem with HYG and JNK it is that those are the only high-yield bond ETFs the mainstream financial press pays attention to. The derivative problem is that by using HYG and JNK as the indicators for the broader junk bond ETF world, <a href="http://www.benzinga.com/markets/bonds/12/12/3144876/following-redemptions-junk-bond-etfs-at-multi-week-highs">compelling funds go ignored</a>.

The Market Vectors International High Yield Bond ETF is one such fund. When folks were crowing about outflows from HYG and JNK, they were also ignoring one of 2012's better asset-gathering stories. IHY debuted in April and now has almost $202 million in AUM. IHY has also gained more than eight percent since its debut. Anything close to those AUM and performance numbers in 2013 would make for a very successful sophomore year.

Vanguard Short-Term Inflation-Protected Securities Index ETF (NYSE: <a class="ticker" href="/stock/vtip#NYSE">VTIP</a>)
Speaking of ETFs to watch in their sophomore seasons, VTIP merits consideration. The fund debuted in October as Vanguard's first foray into the short-term TIPS market. Since there are scores of TIPS ETFs out there, VTIP encroached on someone else's territory. The iShares Barclays 0-5 Year TIPS Bond Fund (NYSE: <a class="ticker" href="/stock/stip#NYSE">STIP</a>) is one example. Again, this tussle could come down to fees. VTIP charges 0.1% per year, just half of what STIP charges. 

Market Vectors High-Yield Muni ETF (NYSE: <a class="ticker" href="/stock/hyd#NYSE">HYD</a>)
Municipal bonds defied conventional wisdom in 2012. Early in the year, there was plenty of chatter regarding an increased number of municipal defaults. That chatter proved accurate and there is no getting around the fact that plenty of states, including large ones such as California and Illinois, are not in the best fiscal health.

Investors shrugged off those concerns to send <a href="http://www.benzinga.com/markets/bonds/12/11/3135673/muni-bond-etfs-jump-to-new-highs-on-cliff-fears">muni bond ETFs soaring</a>. Moreover, investors have shown little reluctance about embracing high-yield muni fare. HYD has performed like a high-beta stock, jumping nearly 18 percent to this point in 2012 while crossing the $1 billion in AUM level. 

HYD and its brethren face some important issues in 2013. First, will the tax treatment of muni bonds change for the worse as politicians seek to generate much-needed revenue? Second, for how long will investors keep ignoring municipal defaults as they hunt for yield?

WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ: <a class="ticker" href="/stock/emcb#NASDAQ">EMCB</a>)
In a year when BOND, and rightfully so, has commanded most of the positive headlines relating to new bond ETFs, it has been hard for other funds to standout. However, the WisdomTree Emerging Markets Corporate Bond Fund has been a standout in its own. Bringing in almost $96 million in just 10 months of trading says as much.

Until recently, emerging markets corporate debt has not been the first destination investors think about when evaluating ex-U.S. bond options. There are signs that is starting to change amid increased issuance of these bonds and high premiums investors are forced to pay on emerging markets sovereign issues. 

For those that think EMCB's concept is too narrow or opaque, think again. The ETF has, in a way, been validated by the appearance of <a href="http://www.benzinga.com/stock-articles/emcb/all">not one, but two competitors</a>.

PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>)
The PowerShares Senior Loan Portfolio, the first ETF to bring senior loans to the masses, has enjoyed an excellent 2012. BKLN is up 9.2 percent and while that lags the performance of HYG and JNK, it is worth noting BKLN's volatility is substantially lower than those rival high-yield funds.

BKLN's success has been a direct result of investors searching for yield and that success if proven by the fund's rapid accumulation of assets. In July, BKLN had $583 million in AUM, but that <a href="http://www.benzinga.com/markets/bonds/12/10/2976126/bank-loan-etf-going-strong">number jumped to $880 million by late September</a> and then over $1 billion by early October. As of December 7, BKLN was home to more than $1.4 billion in AUM.

As a high-yield fund, BKLN is a worthwhile risk appetite gauge and that validates it as a bond ETF to watch in 2013. What will also be interesting is that 2013 will be BKLN's first full trading year with a year competitor. The Pyxis/iBoxx Senior Loan ETF (NYSE: <a class="ticker" href="/stock/snln#NYSE">SNLN</a>) debuted in early November.

For more on bond ETFs, click <a href="http://www.benzinga.com/markets/bonds">here</a>.

After-Hours Center

BKLN

Market Vectors High Yield Municipal Index ETF

SNLN

STIP

VTIP

10 For '13: Bond ETFs For The New Year 

The dreaded fiscal cliff, should it come to pass, could have an adverse impact on myriad asset classes. From dividend stocks to high-yield bonds to select commodities, riskier assets of all stripes could come under pressure if U.S. policymakers cannot avert the GDP-draining fiscal cliff.

One of investors' favored asset classes of 2012, emerging markets denominated in local currencies, could feel a pinch, too. However, in the eyes of one portfolio manager, any damage induced by the fiscal cliff on emerging market bonds may not be severe as some are predicting.

In years past, capital allocated to emerging markets was viewed as so-called "hot" money, meaning investors viewed developing markets debt as a trade, not an investment. That situation has abated in 2012.

"EM local currency bonds are becoming more strategic, as opposed to purely tactical, allocation for many investors," said Market Vectors Portfolio Manager Fran Rodilosso. "We believe the market is supported by, in addition to the underlying fundamentals, improved liquidity, expanding yield curves, and a greater opportunity to diversify. In other words, the money that has flowed in this year might not be as ‘hot' as in previous years."

Supportive Data
Inflow data supports Rodilosso's assertion about flows to local currency bond funds being stickier this year than in previous years. One prime example comes by way of the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: <a class="ticker" href="/stock/emlc#NYSE">EMLC</a>), which Rodilosso manages.

In late November, Market Vectors announced <a href="http://www.benzinga.com/markets/bonds/12/11/3120114/another-emerging-market-bond-etf-sees-assets-soar">EMLC had topped $1 billion in assets under management</a>. The fund enters trading today with with over $1.16 billion in AUM, but back on May 7, EMLC had "just" $743 million in assets.

Rodilosso does admit that not all the hot money is out of the market.

"We witnessed underperformance of EM local debt in 2011, due in part to outflows on a flight-to- quality trade, so that type of hot money is still indeed there," he said in a statement issued by Market Vectors."But the progression towards more permanent allocations and, ultimately, lower volatility still appear to be in place."

EMLC's rivals are gaining assets as well. The iShares Emerging Markets Local Currency Bond Fund (NYSE: <a class="ticker" href="/stock/lemb#NYSE">LEMB</a>) has seen its AUM total spike to almost $367 million from $150 million in just a few weeks. The WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>), the first actively managed ETF to top $1 billion in AUM, has added over 25 percent to its asset total this year.

Post Cliff
If the fiscal cliff does arrive, local currency EM bond ETFs could be hit on the perception that these funds represent a risky asset class. Along those lines, it should be noted that over 60 percent of EMLC's lineup is rated investment-grade. Nearly 80 percent of ELD's constituents carry investment-grade ratings.

Rodilosso said a significant drop in U.S. growth could hamper EM country fundamentals, but he also notes the appetite for local currency EM bonds among institutional investors is growing.

That is not surprising given that investors still want yield. The spread between 10-year U.S. Treasuries and the equivalent Mexican sovereign issue is currently over 380 basis points. For 10-year Treasuries and the comparable Brazilian bond, the spread jumps to 760 basis points. Brazilian and Mexican bonds are among the top holdings in ELD, EMLC and LEMB.

Rodilosso also noted renewed interest in the dim sum bond market, an asset class that many investors passed over through the first three quarters of this year. 

"The consensus seems to be forming that further yuan appreciation over the medium-term can amplify higher rates that most of these entities will pay via U.S. dollar- or Euro-denominated issues."

Investors looking for exposure to dim sum bonds can use either the Market Vectors Renminbi Bond ETF (NYSE: <a class="ticker" href="/stock/chlc#NYSE">CHLC</a>) or the PowerShares Chinese Yuan Dim Sum Bond Portfolio (NYSE: <a class="ticker" href="/stock/dsum#NYSE">DSUM</a>). Those funds have effective durations of 1.91 and 2.78 years, respectively.

For more on emerging markets bond ETFs, click <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/11/3111740/em-bond-etf-sees-amazing-inflows">here</a>.

DSUM

Local Currency EM Bonds Face The Fiscal Cliff

iShares J.P. Morgan EM Local Currency Bond ETF

Comments

iShares J.P. Morgan EM Local Currency Bond

ニュース

最新ニュース iShares J.P. Morgan EM Local Currency Bond (ARCA:LEMB)

ニュース

パートナーシップ

ベンジンガ・グローバル