How do you invest in Emerging Market Bonds?

Bonds are an alien investment to me and in order to expand ones knowledge of investing can anyone explain how the individual retail investor can invest in emerging market bonds?

Can individuals buy into such bonds or do you have to invest through a fund?

Can anyone explain how the coupon, bid price and bid yield quoted in the FT work?

What sort of strategies do you need to think about when investing in foreign bonds?

I would be fairly keen in going long Brazilian and Polish bonds I think...

ringledman said:

Bonds are an alien investment to me and in order to expand ones knowledge of investing can anyone explain how the individual retail investor can invest in emerging market bonds?

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It’s not clear if you are interested in emerging market corporate or government bonds. iShares have an emerging market government bond ETF. There may be other ETFs and funds available. You could search for funds using http://www.moneymate.ie/ratings .

ringledman said:

Can individuals buy into such bonds or do you have to invest through a fund?

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You would have to ask your broker if he can buy individual bonds for you. It might also be prudent to check the typical bid / ask spread and ask how liquid is the market.

ringledman said:

Can anyone explain how the coupon, bid price and bid yield quoted in the FT work?

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Perhaps you should consider doing some homework first to work out the basics of bonds, the terminology, etc. before you consider investing, e.g. check out http://www.investopedia.com/

ringledman said:

What sort of strategies do you need to think about when investing in foreign bonds?

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I’ve no idea on emerging market bonds, but foreign developed market government debt appears to have a low correlation with euro-denominated developed equity markets. If you are into diversification, emerging market bonds are just another asset class to consider in relation to the other asset classes in which you have investments. You would need to work out how they fit into your investment strategy.

Thanks for the links PMU.

Yes need to do more research. As someone in their early 30s I am not that drawn in by bonds yet. I have no problem with volatile equities for now!

I't is however interesting to read about the risks inherent in bonds. I aways thought there was little risk in bonds (except currency risk for overseas bonds and currency debasement aka money printing leading to rising consumer prices).

However what I didn't realise was how to calculate the market interest rate or current yield (divide coupon by bid price) which can create huge capital gains or losses depending upon the movement in the bid price.

Just looking at the FT and the Bonds- High Yield and Emerging Market section.

Argentina €(US dollar) 2017 bond, 11.38% coupon. 16.50 bid price. divide one into the other equates to a market interest rate of 69%! Crazy! Early buyers of these must have lost so much capital. Likewise new purchasers could make a very large interest return, abeit at very high risk.

An interesting asset class it seems...