South Africa, Brazil and Mexico are the best emerging markets to buy local-currency bonds because they offer higher yields than the debt of developed nations, according to Pacific Investment Management Co, manager of the world’s biggest bond fund.
“Some of our largest investments in emerging local- currency debt are in these three countries,” Ramin Toloui, Pimco’s global co-head of emerging markets portfolio management, said in an interview. “In an environment where global growth rate is very slow, and where core industrialized yields are very low, there tends to be a strong force of gravity that pulls those rates down over time. That’s why these are our favourites”.
Global investors have plowed $25.3 billion in new money into emerging-market bond funds this year through September, compared with $17.3 billion in 2011 and $53.6 billion in 2010, according to a data compiled by Cambridge, Massachusetts-based research company EPFR Global. Newport Beach, California-based Pimco managed $1.82 trillion at the end of June.
“You can get 9 percent yields in investing in Brazil, 6 percent in South Africa and more than 5 percent in Mexico,” Toloui said.