Dollar-denominated emerging market bonds could be adversely affected if the yields on US government bonds continue to rise, according to Standish Investment Management.
Alexander Kozhemiakin, head of emerging market debt at the BNY Mellon subsidiary, said investors should look towards bond funds with exposure to local currencies rather than those investing in dollar-denominated bonds.
Mr Kozhemiakin, whose team runs the $3.9bn (£2.5bn) BNY Mellon Emerging Markets Debt Local Currency fund and the $604.5m Emerging Markets Debt fund, said: “I would expect dollar-denominated bonds to behave similar to others in a sell-off.
“In the first quarter of this year dollar-denominated sovereign debt has been worse because Treasury yields have sold off.”
He said such bonds could do well if interest rates remained low, but once they began to rise, local currency bonds would benefit from related currency movements.
