EM that have had financial difficulties have best performing sovereign bonds

The top performers in emerging markets appear to be those that have had financial difficulties in the past, Manju Dalal writes for the Wall Street Journal (paywall). Sovereign bonds rated ‘BB’ and lower, tracked by Bank of America Merrill Lynch Global Emerging Market Sovereigns Index, have returned 10.2% this year. US corporate junk bonds have returned 7.3% over the same period. Top performers include Egypt, whose 30-year bonds have returned 18.3% since they were sold in January. Despite defaults in the past, Argentina’s nine- and 29-year old bonds issued in April have returned around 15.4% and 14.8%, respectively. El Salvador’s bonds have returned 17.9%, despite rating agencies assessment that it remains financially weak.