EM Debt Strength Holds as DM Policy Noise Grows>
•February 10, 2026
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Why It Matters
The ETF’s performance underscores emerging‑market debt’s appeal as a higher‑yield alternative to developed‑market bonds, signaling a shift in capital toward risk‑adjusted returns in a noisy policy landscape.
Key Takeaways
- •EM bond ETF yields 5.56%, outpacing US Treasuries
- •Local currency exposure at 48% drives strong returns
- •Increased positions in Ecuador and Venezuela reflect policy optimism
- •Reduced Uruguay and South Africa exposure due to policy setbacks
- •Advisor covering expenses through 2027 lowers investor cost
Pulse Analysis
Emerging‑market sovereign bonds have re‑asserted their relevance as global investors navigate a fragmented monetary policy backdrop. While U.S. Treasury yields climb, the VanEck Emerging Markets Bond ETF leverages local‑currency exposure and carry trade dynamics to deliver a 5.56% SEC yield, markedly higher than the risk‑free rate. This yield advantage, combined with a disciplined duration of 5.2 years, positions the fund as a compelling income source for yield‑seeking portfolios, especially as developed‑market debt faces price pressure from rate volatility.
Geopolitical events continue to shape EM debt performance, with recent shocks in Venezuela and broader regional tensions prompting a rally in hard‑currency sovereigns. VanEck’s strategic tilt toward Ecuador and Venezuela reflects confidence in fiscal consolidation and improving political risk, while trimming exposure to Uruguay and South Africa after adverse policy moves. These tactical adjustments illustrate how active management can capture asymmetric risk premiums, offering investors differentiated upside in a sector often perceived as homogeneous.
Cost efficiency further enhances the fund’s attractiveness. With an expense ratio of 0.76% and the adviser covering most fees until mid‑2027, net returns remain robust relative to peers. For institutional and high‑net‑worth investors, the combination of higher yields, active geopolitical positioning, and lowered expense drag creates a compelling case to allocate capital to emerging‑market bonds, diversifying away from over‑priced developed‑market fixed income and bolstering overall portfolio resilience.
EM Debt Strength Holds as DM Policy Noise Grows>
Key Takeaways:
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Emerging markets have recently outperformed developed markets despite ongoing rate volatility.
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Local currency exposure and carry are driving returns, even as rising U.S. yields weigh on USD bonds.
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Geopolitical shocks benefited EM assets again, reinforcing their relative value compared to developed markets. EMBX is currently yielding 5.56% (30-Day SEC Yield)*
*Past performance is no guarantee of future results. Please see 30-Day SEC Yield definition and disclosures at the end of this content.
The views and opinions stated herein should not be construed as any call to action, are not recommendations to buy or sell any security, or to adopt any investment strategy, are for illustrative purposes only, are subject to change without notice, and are those of the author(s) and not necessarily those of VanEck or its other employees.
The VanEck Emerging Markets Bond ETF (EMBX) is yielding 5.56% (30-Day SEC Yield), and was up 2.19% in January, compared to 1.43% for its benchmark, the 50% J.P. Morgan Government Bond Index - Emerging Markets Global Diversified (GBI-EM) and 50% J.P. Morgan Emerging Markets Bond Index (EMBI), 0.96% for the Global Agg, and -0.26% for the planet’s favorite “safe haven”, low volatility asset, US Treasuries. In 2025, the ETF was up 19.05% compared to 16.79% for its benchmark. Local currency led the month, with USD bonds able to rally but held back by “risk” in the “risk-free” asset, Treasuries (i.e., yields rose). We made few material changes, despite a very strong January and 2025. Local currency exposure is at 48%, Carry is 6.5%, yield to worst (YTW) is 7.5% and duration is 5.2.
Average Annual Total Returns* (%) (In USD)
Month End As of January 31, 2026
1 Mo
3 Mo
YTD
1 Yr
3 Yrs
5 Yrs
10 Yrs
EMBX (NAV)
2.20
4.47
2.20
19.17
9.93
4.48
5.76
EMBX (Share Price)
2.23
4.40
2.23
19.07
9.89
4.46
5.75
50% GBI-EM/50% EMBI
1.43
3.45
1.43
16.43
9.26
2.00
4.34
Average Annual Total Returns* (%) (In USD)
Quarter End As of December 31, 2025
1 Mo
3 Mo
YTD
1 Yr
3 Yrs
5 Yrs
10 Yrs
EMBX (NAV)
1.41
3.15
19.04
19.04
10.84
3.87
5.49
EMBX (Share Price)
1.12
3.03
18.91
18.91
10.80
3.85
5.48
50% GBI-EM/50% EMBI
1.11
3.32
16.80
16.80
10.08
1.50
4.20
* Returns less than one year are not annualized.
The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.
Prior to 10/06/2025, the Fund operated as the VanEck Emerging Markets Bond mutual fund; performance shown before that date is that fund’s NAV performance (Class I, unadjusted for today’s ETF expenses).
The "Net Asset Value" (NAV) of a Fund is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF 's intraday trading value. Investors should not expect to buy or sell shares at NAV.
EMBX Total Expense Ratio – 0.76%. Van Eck Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except for the fee payment under the investment management agreement, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to pay the offering costs until at least May 1, 2027. “Other Expenses” have been restated to reflect current fees.
Warsh happened. World panicked. EM rallied. We like to comment when we have something to say that you might not have heard before, or to re-explain something that might be poorly explained/understood. Nothing to say here. Dovish for rates and hawkish for balance sheet? This is well-discussed terrain. Our only framing is that central banking is hyper-politicized in the US. Now, we’re open to the idea that Warsh could be viewed as anti-politicization, too. The market’s view is the former. Is that what you want as a reserve asset?
Venezuela happened. World panicked. EM rallied. In fact, Venezuela bonds gapped higher and neighboring Colombia did the opposite of panicking by being the strongest local currency YTD (we are overweight). We were overweight Venezuela bonds (in USD) through the critical weekend after which bonds gapped higher. And we bought more since (on a brief pullback)1. We’ve written in detail on both Venezuela and Colombia (Dave Austerweil and Natalia Gurushina have a truly great and geeky piece coming out on how our process values Venezuela, stay tuned). The appropriate spin is yet again “geopolitical risk boosts EM”. Your author is in Dubai as he writes, and they are worried about Iran “risk”. Just like everyone was worried about Venezuela “risk”. I believe the market’s perception of risk appeared asymmetric during this period. Your author is struck by the consensus here that Iran represents “risk,” Let’s state this simply: a significant negative outcome for Iran could, paradoxically, reduce the risk and discount rate that should be applied to assets elsewhere in the region, (those that are not in Iran). We think it’s bullish.. And it will create potential opportunities.
Exposure Types and Significant Changes
The changes to our top positions are summarized below. Our largest positions in January were Mexico, Brazil, Malaysia, Poland, and Colombia:
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We increased our hard currency sovereign exposure in Ecuador. The country’s fiscal consolidation is on track, and at the end of December the IMF approved the fourthhreview of the Extended Fund Facility program, unlocking additional disbursements. The government also successfully tapped the international financial market (USD4B), lowering the risk associated with forthcoming maturities. In terms of our investment process, this improved the policy/politics test score for the country.
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We also increased our hard currency sovereign exposure in Venezuela, following the dramatic shift in the political landscape that resulted in the removal of President Maduro and the appointment of Delcy Rodriguez as the acting president. Rodriguez is considered practical and intent on working together with the U.S., which increases the probability of the “goldilocks” scenario with subsequent elections and inflows in Venezuela’s oil sector. This scenario also increases the chances of a creditor-positive debt restructuring with high recovery value for bondholders. In terms of our investment process, this improved the policy/politics test score for the country.
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We reduced our local currency exposure in Uruguay, where the central bank surprised with a massive 100 bps rate cut in order to weaken the currency and make sure that inflation does not fall below the target range. Uruguay was a popular long among investors in EM local debt, but the rate worsened the policy/politics test score for the country, leading to profit-taking.
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We also reduced our hard currency sovereign exposure in South Africa. South Africa’s sovereign spread closed the gap with BB-rated sovereigns (which opened in the middle of 2023) as the market almost fully priced in structural and policy improvements under the government of national unity. In the absence of new positive catalysts, this worsened the technical test score for the country, exposing it to the negative influence of exogenous factors.
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