In yield-starved world, emerging market debt attracts assets

When Moody’s downgraded Turkey’s credit rating to below investment grade on Friday, September 23, few were surprised when the country’s debt and equity markets sold off the following Monday. More surprising, however, were the results of an auction of new government 10-year notes: the debt offering received the most bids in nearly two years. Turkey’s most successful local bond sale since 2014 indicates what many are calling the bottom of a recent selloff, which began after the attempted military coup in July sent protestors into the streets and bond yields up nearly a full percentage point. Today, with Turkish debt yields near 10 percent, investors are looking at the emerging market nation with new eyes in light of near zero to negative rates in parts of the developed world. This year, more than $4.37 billion has flowed into Turkish sovereign bonds, according to central bank data. The Turkish trend isn’t isolated. Fund data provider Morningstar reports that investors poured $4.2 billion into all emerging market debt funds in July and August. What’s the reason? In a word: yield. “Everyone is looking for yield,” says Jamal Elbarmil, who is the co-portfolio manager of the Azzad Wise Capital Fund, an alternative international