The appeal of emerging-market dollar bonds

THE HUNTGDPPIMCO for bonds that pay more interest to retirees and others requiring a fixed income has taken institutional investors to some exotic places in recent years. Last month they alighted on Ghana, which issued $3bn-worth of Eurobonds, as dollar bonds issued outside America are known. Ghana may be exotic but it is also risky. Its government debt-to- ratio was a hefty 78% in 2020. With such risks come rewards: the yields on Ghana’s new Eurobonds were roughly 8-9%.The alternatives are hardly compelling. The spread, or additional yield, over Treasury bonds offered by American corporate bonds is close to its pre-pandemic low and not far from its all-time low. For a given credit rating, an investor can usually get a wider spread over Treasuries (and thus a higher expected return) by buying the dollar bonds issued by an emerging-market sovereign, says Yacov Arnopolin of , a big bond-fund manager.