Emerging Markets Bonds Hold Pockets of Value Following Sell off Driven by Taper Expectations, Says Market Vectors’ Fran Rodilosso

NEW YORK--()--With the Federal Reserve’s (the “Fed”) decision to begin its “tapering”, the initial steps of this process could likely cause some bond buyers to dial back their risk profiles, according to Fran Rodilosso, fixed income portfolio manager with Market Vectors ETFs.

“The likelihood of continued Fed tapering in 2014 implies a shift in the supply/demand equation for spread funds next year,” said Rodilosso. “When you ultimately remove what was until last week $85 billion per month of demand for higher quality bonds, at least at the margin, some buyers are going to come back down the risk curve.”

“Earlier this year, some fixed income asset classes, including Emerging Markets (EM) local currency sovereign, and EM hard currency corporate and sovereign bonds, reacted violently to the prospect of tapering and therefore are ending the year having underperformed their developed market counterparts,” Rodilosso continued. “However, looking forward to 2014, I would highlight that EM bonds represent one area of fixed income where pockets of value still may remain. Local markets that were beaten up over the summer may not have fully recovered. At the same time, corporate credit spreads have moved meaningfully wider versus their U.S. counterparts.”

Rodilosso added that the Market Vectors® EM Aggregate Bond Index (ticker: MVEMAG) tracks the performance of the EM bond universe, covering local currency and hard currency sovereign and corporate bonds. This index was designed to play a role in helping to benchmark manager performance versus the broad opportunity set of EM bonds.

In addition, Market Vectors also launched an ETF earlier this month that is designed to track MVEMAG. That ETF, Market Vectors EM Aggregate Bond ETF (NYSE Arca: EMAG), offers a diversified, all-in-one approach to investing in EM bonds, in a liquid, transparent ETF format.

Mr. Rodilosso has 20 years of experience trading and managing risk in fixed income investment strategies, including 17 years covering emerging markets. Mr. Rodilosso oversees Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHY™), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC®), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM®), Investment Grade Floating Rate ETF (NYSE Arca: FLTR®), Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL®), International High Yield Bond ETF (NYSE Arca: IHY®), and Renminbi Bond ETF (NYSE Arca: CHLC®). As of November 30, 2013, the total assets for these ETFs amounted to approximately $1.4 billion.

About Market Vectors ETFs

Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $22.5 billion in assets under management, making it the seventh largest ETP family in the U.S. and 10th largest worldwide as of November 30, 2013.

Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. The Fund’s underlying securities may be subject to call risk, which may result in the Fund having to reinvest the proceeds at lower interest rates, resulting in a decline in the Fund’s income.

Market Vectors EM Aggregate Bond Index (the “Index”) is the exclusive property of Market Vectors Index Solutions GmbH (the “Index Provider”), which has contracted with Solactive AG (the “Calculation Agent “) to calculate the Index. The Calculation Agent is not an adviser for or a fiduciary to any account, fund or ETF managed by Van Eck Associates Corporation. The Calculation Agent is not responsible for any direct, indirect, or consequential damages associated with indicative optimized portfolio values and/or indicative intraday values. Market Vectors Emerging Markets Aggregate Bond ETF (the “Fund”) is not sponsored, endorsed, sold or promoted by the Index Provider, which makes no representation regarding the advisability of investing in the Fund.

Principal International and Emerging Markets Risk Factors: Fixed income securities are subject to credit risk and interest rate risk. High yield bonds may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. International investing involves additional risks which include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity, and political instability. Changes in currency exchange rates may negatively impact the Fund’s return. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict, and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. Diversification does not assure a profit nor protect against loss. Please see the Market Vectors Emerging Markets Aggregate Bond ETF (the “Fund”) prospectus for full disclosure information.

The “net asset value” (NAV) of an ETF is determined at the close of each business day, and represents the dollar value of one share of the ETF; it is calculated by taking the total assets of an ETF subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as an ETF's intraday trading value. Investors should not expect to buy or sell shares at NAV. Total returns are based upon closing “market price” (price) of the ETF on the dates listed.

Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker‐dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.

Not FDIC Insured — No Bank Guarantee — May Lose Value

Van Eck Securities Corporation, Distributor
335 Madison Avenue, New York, NY 10017

Contacts

Media:
MacMillan Communications
Mike MacMillan / Chris Sullivan, 212-473-4442
chris@macmillancom.com

Sharing

Contacts

Media:
MacMillan Communications
Mike MacMillan / Chris Sullivan, 212-473-4442
chris@macmillancom.com