Although emerging bond funds have hit a rough patch, many EM economies are in a growth spurt, “supported by healthy demand for commodities and other exports in end market such as Europe.” This according to an article in Barron’s.

The article quotes co-manager of the TCW Emerging Markets Income fund Penelope Foley, who says that even if rising rates pressure prices, bond yields for dollar-based debt average around 6%. The upshot, she says, “should be a total return of 4%-5%–more than most other areas of the global fixed-income market.”

The article shares some of Foley’s insights on the market environment:

• The volatility in emerging markets will last a while longer. “Investors,” she says, “have been concerned about specific countries—the fiscal situation in Argentina, for example, and disappointing economic growth in Brazil.”
• Economic fundamentals reflect that we no longer have a “Goldilocks” environment with synchronized global growth and lower inflation, says Foley, adding that emerging markets are now in the “early to middle stage of a growth cycle, with positive momentum.”
• “Dollar-based bonds trade close to their long-term average compared to Treasuries,” she argues, which suggests they’re “approaching fair value from a historic perspective—while other parts of the global fixed-income market look expensive.”

The article shares Morningstar data showing that the TCW Emerging Markets has returned 8% (annualized) over the past decade, “beating 95% of peers.”