ButtonwoodA tourist's guideThe appeal of high-yielding emerging-market dollar bondsThe hunt for bonds that pay more interest to retirees and others requiring a fixed income has taken institutional investors to some exotic places in recent years.Last month they alighted on Ghana, which issued $3bn-worth of Eurobonds, as dollar bonds issued outside America are known.Ghana may be exotic but it is also risky. Its government debt-to-GDP ratio was a hefty 78% in 2020. With such risks come rewards: the yields on Ghana's new Eurobonds were roughly 8-9%.The alternatives are hardly compelling.The spread, or additional yield, over Treasury bonds offered by American corporate bonds is close to its pre-pandemic low and not far from its all-time low.For a given credit rating, an investor can usually get a wider spread over Treasuries (and thus a higher expected return)by buying the dollar bonds issued by an emerging-market sovereign, says Yacov Arnopolin of pimco, a big bondfund manager.There are reasons for the discrepancy.Investors feel more comfortable owning corporate bonds, because the Federal Reserve has, in effect, provided a liquidity backstop for the market since last March.American companies stand to benefit from President Joe Biden's $1.9trn fiscal-stimulus package.
