Will Vanguard add Bond Fund/ETF for Emerging Markets?

[Jagman]

Thoughts? ...it seems that this asset class has performed well over an extended period of time. Fidelity's FNMIX has a great record, despite its costs.

[Jagman]

Would you make a cheap emerging markets bond fund/etf part of your portfolio?

[nisiprius]

They announced one in 2011, but haven't launched it yet.

Vanguard Emerging Markets Government Bond Index Fund will seek to track the investment performance of the Barclays Emerging Markets Sovereign Index (USD). The target benchmark features approximately 200 government bonds in 39 countries. By investing solely in U.S. dollar denominated international bonds, the fund will not subject U.S.-based investors to currency risk.

[am]

Thought bond portion of the portfolio is for reducing volatility and lowering risk. Does not seem like EM bonds would fit into most boglehead portfolios. Why not just increase allocation to EM stocks?

[nisiprius]

Thought bond portion of the portfolio is for reducing volatility and lowering risk. Does not seem like EM bonds would fit into most boglehead portfolios. Why not just increase allocation to EM stocks?

Well, the draft prospectus says "Credit risk should be moderate for the Fund because it purchases investment-grade and high-yield bonds." They are dollar-denominated, so no currency risk. So the volatility should be much lower than for emerging markets stocks. But as to what the big advantage is supposed to be, I don't know. I suspect it turns out that emerging markets' interest rates are currently higher than U.S. interest rates, i.e. recency. I haven't bothered to check if that's true. Anyone know?