Short Description
Amid the “Sell America” trade chatter, emerging market bonds are soaring. Discover why investors are diversifying internationally while still trusting core U.S. fixed income.
Read Time
3 minutes
Main Article
While headlines debate the “Sell America” trade, a quiet winner has emerged in global portfolios: emerging market bonds. Led by funds like the iShares JPMorgan USD Emerging Markets Bond ETF (EMB), which returned over 13% in 2025, this asset class is attracting significant attention. The rally is fueled by a weaker U.S. dollar, concerns over the nation’s fiscal health, and strong recent performance. According to BondBloxx co-founder Joanna Gallegos, this surge reflects savvy international diversification more than a full-scale exodus from U.S. markets. Investors are chasing returns and hedging currency risk, but “the U.S. trade is not going away,” she notes.
Indeed, data confirms U.S. assets remain foundational. January saw record inflows into U.S. market and taxable fixed income ETFs, like Vanguard’s BND and VCIT. This underscores a strategy of complementing, not replacing, domestic holdings. Gallegos points to a resilient U.S. economy, strong corporate balance sheets, and a steepening yield curve as reasons for ongoing confidence. The move now, experts suggest, is for investors to re-deploy massive cash reserves from money markets into higher-yielding bonds as rate cuts loom, making income a proactive portfolio goal rather than just a defensive play.
For investors, the current landscape presents a dual opportunity. First, strategically allocated emerging market bonds can enhance yield and diversification. Second, within the vast U.S. credit market, moving into segments like BBB-rated investment-grade corporate debt offers attractive U.S. Treasury yields without historically high default risk. The key takeaway is that bonds have evolved from mere safety nets into dynamic sources of income and growth, with both international and domestic markets playing essential, complementary roles.
Short Summary
The rise of emerging market bonds highlights a strategic push for international diversification and yield, yet U.S. fixed income remains a core, resilient holding. Investors are wisely broadening their bond exposure to include high-performing international assets while capitalizing on opportunities within the robust U.S. credit market, transforming fixed income into a key source of portfolio growth and income.
