This is a passive bond ETF that tracks the Bloomberg EM Local Currency Liquid Government Bond Index. It targets emerging market local-currency government bonds, both investment grade and non-investment grade, and holds bonds with at least one year remaining to maturity.

It suits long-term investors who want exposure to non-dollar currencies and diversification through emerging market bonds.

It is a passive (index-tracking) ETF launched in 2011 by State Street (SSGA).

The fund holds government bonds issued by emerging market governments in their local currencies, using a sampling approach. It applies country weight caps to limit concentration in any single country and spreads its holdings across many emerging markets, including Brazil, Mexico, India, and Indonesia.

• Country weight caps limit concentration risk in any particular emerging market
• Direct exposure to local-currency bonds without a dollar hedge, which adds currency diversification

Assets under management (AUM) stand at $2.2B, and the expense ratio is 0.30% per year.

GOVT, SHV, BOXX, GBIL, and others shown in the table are US Treasury or short-term bond ETFs, a different asset class from EBND. They are dollar-based safe-haven assets, whereas EBND holds emerging market local-currency bonds, so the fee level and currency exposure structure differ fundamentally.

Emerging market local-currency bonds tend to face currency loss pressure during periods of dollar strength, and returns can recover when the dollar turns weaker. Both the global interest rate cycle and emerging market currency trends affect performance at the same time.

Fund flows into emerging market assets respond sensitively to the direction of US interest rates and the dollar index. When risk appetite recovers, inflows into emerging market bond ETFs tend to increase.

Broad diversification across emerging market local-currency bonds is a strength, but it comes with currency volatility and risks unique to emerging markets.

EMB, shown in the table, is a dollar-denominated emerging market bond ETF. Unlike EBND, it holds emerging market government bonds issued in dollars, so its currency structure differs. VWOB, which focuses on dollar-denominated emerging market bonds, ELD, which blends local currency and dollar bonds, and LEMB, which focuses on local-currency bonds while hedging part of the currency fluctuation, are also worth comparing. If you want exposure to emerging market high-yield bonds, you can also consider EMHY.

Here are the points to review before investing in EBND. It is important to fully understand the currency volatility and country risk unique to emerging market local-currency bonds before deciding on position size.

Given the nature of local-currency bonds, weakness in emerging market currencies directly causes losses when converted into dollars. You should monitor changes in the weights of politically or economically unstable emerging markets along with the global interest rate cycle.

It offers broad coverage for investors who want to diversify across emerging market local-currency bonds. If you want currency diversification without a dollar hedge, EBND fits; if you want to reduce the burden of currency swings, it is reasonable to compare the dollar-denominated bond ETFs EMB or VWOB.