原文来源：The Economist 2019-3-29
How emerging-market local-currency bonds might fit in your portfolio
Their appeal lies in their distinctiveness
Article
IN THE FIRST episode of “Cheers”, a 1980s television comedy, Diane Chambers, a graduate student, intends to elope with Sumner Sloan, a literature professor. In stark contrast to the genial barflies at Cheers, a Boston watering-hole, Sloan is well-educated and middle-class—but also, it turns out, vain and deceitful. He’s goofy, says Sam Malone, the bartender whose on-off romance with Diane is the show’s dramatic axis. “He’s everything you’re not,” she retorts.
And so is Diane. That she and Sam are dissimilar in personality and social background is one reason why “Cheers” is so funny. The yoking of opposites is a dependable ploy in situation comedies. It is also a useful trick in investing. The injunction not to put all your eggs in one basket can be found in any finance textbook. But there is more to diversification than that. The ideal diversifier is not just something other than what you own, but something that contrasts with it.
Suppose your investments are tilted heavily towards the S&P 500 index of America’s leading shares, a principal character in global capital markets. Where can you find a Diane Chambers to balance your Sam Malone? Emerging-market government bonds in the issuer’s own currency may be the contrast you are seeking. They are not stocks, they are not denominated in dollars and they are not widely owned by foreigners. They are everything your existing portfolio is not.
Investing in emerging markets opens up a broader set of opportunities. GDP growth is generally faster, as there is greater scope to benefit from existing know-how than in rich economies. The business cycle is different, too. There is a spectrum of risk assets to choose from. The cautious prefer hard-currency bonds, which pay in dollars and are issued by governments and firms.
Further along the spectrum are racier bets. Shares carry the same hazards in emerging markets as anywhere else. Stockholders are behind bondholders in the queue to be paid, should earnings falter. But there is an additional exchange-rate risk: a fall in local currencies would be a money-loser for rich-world investors.
For those willing to take on foreign-exchange risk, government bonds issued in local currency might have more appeal. Government bonds are in general a hedge against equity risk. And while indices of emerging-market stocks lean heavily towards Asia, and thus to China’s supply-chain, bond indices have broader regional balance, says Yacov Arnopolin of PIMCO, a big bond firm. Expected returns are decent. For instance, the yield on the J.P. Morgan GBI-EM index of biggish issuers is 6.2% (see chart). That is considerably higher than the yield on Treasury bonds.
This yield spread is a buffer against currency risk. A bet on local-currency bonds is in essence a bet against the dollar. Ideally you would gain on both the bonds and the currency. But at the very least, you hope the “carry” (extra yield) will make up for any exchange-rate losses. An important consideration is whether the currencies you are buying into are overvalued. It is not obvious that they are. Real exchange rates in most big emerging markets are either close to their ten-year averages or below them.
A burst of inflation would alter the calculation. Currencies would then need to fall to keep the real exchange rate steady and exports competitive. Yet there has been a notable drop in inflation in emerging markets. Partly this is down to the adoption of inflation targets by central banks; partly it is more disciplined fiscal policy, says Jan Dehn of Ashmore, a fund manager. Of the 25 emerging markets listed on the indicators page of The Economist, only three (Argentina, Egypt and Turkey) have inflation in double digits. For most, it is below 3%.
Of course, the fate of the dollar is also a key consideration. Shifts in risk appetite will make the dollar jumpy. It tends go up against most currencies when traders fret about the world economy. But the Federal Reserve has indicated that it is not inclined to raise interest rates in America for a while. That militates against further dollar strength.
To buy local-currency bonds is to bet on a falling dollar. That might seem reckless. In fact, such bonds are a counterweight to the typical equity portfolio, which is groaning with American stocks and thus heavily exposed to dollar risk. They tend to have a low weight in rich-world bond portfolios, says Mr Dehn. Local-currency bonds sit as awkwardly among “safe” Treasuries or Bunds as Sumner Sloan in a blue-collar Boston bar. In short, they are quite unlike everything you already own.
Notes
television comedy
电视喜剧
elope with
和某人私奔
In stark contrast to the genial barflies at Cheers, a Boston watering-hole, Sloan is well-educated and middle-class
指区别十分明显的，stark difference；亲切的酒吧常客；酒吧
but also, it turns out, vain and deceitful.
一般意思是徒劳的，useless，然偶这边意思是自负的，自负过高的（可以这么记，自负的人是useless的）；不诚实的，骗人的
He’s goofy, says Sam Malone, the bartender whose on-off romance with Diane is the show’s dramatic axis.
愚蠢的，stupid；断断续续的爱情关系；电视剧的矛盾中心；
Ex: The redress of injustice is the recent democratic strategies’ dramatic axis.
dissimilar in personality and social background
个性与社会背景不同
The yoking of opposites is a dependable ploy in situation comedies.
yoke：将（一般是矛盾不协调的事物）强行融合；手法花招；情景喜剧
The injunction not to put all your eggs in one basket can be found in any finance textbook.
警告
Suppose your investments are tilted heavily towards the S&P 500 index of America’s leading shares
tilt：倾斜，怎么描述重仓S&P500指数？
Emerging-market government bonds in the issuer’s own currency
以发行国本国货币计量
opens up a broader set of opportunities
有很多机会
there is greater scope to benefit from existing know-how than in rich economies
获利空间很大；
knowledge of how to do sth and experience in doing it 专门知识；技能；实际经验
We need skilled workers and technical know-how.
我们需要熟练工人和专业技术知识。
There is a spectrum of risk assets to choose from.
a complete or wide range of related qualities, ideas, etc. 范围；各层次；系列；幅度
a broad spectrum of interests
广泛的兴趣范围
The cautious
谨慎的人，adj前面加个the
Stockholders are behind bondholders in the queue to be paid, should earnings falter.
原句是If earnings should falter, stockholders are behind bondholders in the queue to be paid. 用了省略倒装；如果收入衰减，那么bondholder比stockholder优先得到偿付
For those willing to take on foreign-exchange risk
承担外汇风险
stocks lean heavily towards Asia
'lean to/ towards/ toward sth to have a tendency to prefer sth, especially a particular opinion or interest 倾向，偏向（尤指某意见或利益）
The UK leant towards the US proposal.
英国倾向于美国的提案。
Expected returns are decent.
of a good enough standard or quality 像样的；相当不错的；尚好的(informal)
a decent meal/ job/ place to live
相当不错的饭菜╱工作╱住所
This yield spread is a buffer against currency risk.
缓冲垫
Ideally you would gain on both the bonds and the currency. But at the very least, you hope the “carry” (extra yield) will make up for any exchange-rate losses.
at the (very) 'least used after amounts to show that the amount is the lowest possible （用于数量之后）至少，最少
It’ll take a year, at the very least.
这至少需要一年时间。
Partly this is down to the adoption of inflation targets by central banks
be down to sb/ sth to be caused by a particular person or thing 由…引起（或造成）
She claimed her problems were down to the media.
她声称她的问题是媒体造成的。
more disciplined fiscal policy
更严格的
That militates against further dollar strength.
妨碍
In fact, such bonds are a counterweight to the typical equity portfolio, which is groaning with American stocks and thus heavily exposed to dollar risk.
平衡力
groan with sth (formal) to be full of sth 被某物堆满（或摆满、装满、充满）
tables groaning with food
摆满食物的桌子
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The injunction not to put all your eggs in one basket is common in any finance textbook. For those whose investments tilted heavily towards the S&P 500 index of American’s lending shares, how to choose another basket? Maybe the emerging-market government bonds in the issuer’s own currency is a good choice since they are dissimilar in all aspects from American’s lending shares and can open up a broader set of opportunities.
Reasons are as following:
- The growth of GDP is faster in emerging-markets, making the profit of these bonds decent.
- Bondholders are before stockholders in the queue to be paid.
But we also should take the foreign-exchange risk into consideration.
A fall in local currencies means that you would get less when changing your local currencies back to dollars. So, ideally you can gain both from the bonds and currency if the local currencies go up. However, if local currencies go down, your return will be eaten to some extent.
So, now, what will influence ups-and-downs of local currency?
- A burst of inflation. Local exporters will charge more in order to maintain the profit. If the currency didn’t go down, the counterpart importers had to pay more and this fact might lead to the failure of transactions. So, currencies have to fall to keep the real exchange rate steady and exports competitive.
- The fate of dollars. The rise of dollars means the fall of other currencies. The rise of interest rate driven by the Federal Reserve will cause the dollar to rise.
In one word, to buy local-currency bonds is to bet on a falling dollar. Investing heavily on S&P 500 index of American’s lending shares is to bet on a rising dollar from the currency’ s aspect. So, this strategy forms a hedge.
