Gross Peso Tweet Not Doing Much For EM Bond ETFs

Pacific Investment Management Co.'s Bill Gross has a well-documented affinity for Mexican debt and the country's currency, the peso.

With that sentiment being widely known throughout global bond markets, that might be the reason more bullish comment from Gross about the Mexican peso are not doing much today to lift ETFs that are heavy on Mexican bonds.

On Tuesday, Gross, founder of PIMCO, took to Twitter to praise Mexico's low debt levels and stability in its target lending rate.

Peso fondness is nothing new from Gross. Last year, the bond manager said investors should favor "'clean dirty shirt' sovereigns (U.S., Mexico and Brazil)."

Still, Gross reiterating his bullish view of the Mexican currency is not doing much today to help those ETFs that feature noticeable allocations to Mexican debt. Of that group, only the Market Vectors LatAm Aggregate Bond ETF (BONO) is trading higher today and only modestly so.

The unheralded BONO has a 14.5 percent weight to peso-denominated Mexican sovereign debt. BONO has an average modified duration of 5.89 years and a 30-day SEC yield of 4.71 percent.

The iShares Emerging Markets Local Currency Bond Fund (LEMB) is trading slightly lower today. That ETF features a 7.41 percent weight to peso-denominated bonds, but investors should note South Korea and Brazil dominate this ETF, combing for 34 percent of its weight.

Those looking for exposure to Mexican bonds without a full regional commitment to Latin America can consider the WisdomTree Emerging Markets Local Debt Fund (ELD). ELD, the second-largest actively managed ETF on the market today, allocates about 10.6 percent of its weight to peso-denominated bonds making the peso the ETF's largest currency holding. About 88 percent of ELD's holdings are rated investment-grade. ELD is off a quarter of a percent today.

On above average turnover, the SPDR Barclays Emerging Markets Local Bond ETF (EBND) is lower by nearly 0.7 percent, making it Wednesday's worst offender of the Mexico bond ETFs mentioned here. Mexico is EBND's third-largest country at nearly nine percent, trailing Brazil and South Korea.

South Korea could be the issue with EBND and LEMB today because on Tuesday the country's Financial Supervisory Service said foreign investors pulled $2.59 billion out of the country's financial markets last month, the highest level since December 2011, Reuters reported.

BY The ETF Professor