Foreign Dollar Debt

Bloomberg: Chinese Buyers Seek Dollar Assets as Promise of Yuan Gains Fades
“People are showing more interest in owning U.S. or Hong Kong dollar-denominated assets,” said Desmond Soon, Singapore-based head of investment management in Asia outside of Japan at Western Asset, which manages about $450 billion. “Investors are concerned about two-way volatility,” he added, referring to the yuan. Hong Kong’s currency is pegged to the greenback.
Owning dollar denominated U.S. assets is not a bad strategy, but I would not want to be holding any USD assets held by firms earning foreign currency because of default risk

There is a popular ETF, iShares JPM USD Emerging Market Bond (EMB) and a newer fund, iShares Emerging Market Local Currency Bond (LEMB). Similar funds, but the former owns USD denominated debt and the latter local currency debt. The chart below is the price ratio, which looks very similar to a chart of the U.S. dollar index. It lines up almost perfectly with an inverted chart of WisdomTree Emerging Market Currency (CEW). EMB is flat over the past 18 months, but LEMB is down about 20%.

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