As 2025 draws to a close, global investors are increasingly diversifying beyond crowded U.S. equity markets, and emerging markets (EM) are capturing significant attention. While EM equities have surged, with the MSCI Emerging Markets index (up 29.7% as of Nov. 28, 2025) outperforming developed markets (with MSCI World up 20.6%) this year, bonds in particular are gaining traction as a strategic alternative.

This interest is driven by a search for attractive yields, diversification benefits and a hedge against potential volatility in developed market equities. For investors looking to capitalize on this trend, focusing on dedicated emerging market bond exchange-traded funds (ETFs) can provide targeted exposure to this compelling opportunity.

Why EM Economies are Gaining Ground?

Of late, emerging economies have been witnessing robust growth trends, driven by resilient domestic consumption and, in places like Asia (e.g., Vietnam and Malaysia), a lift from strong tech-related export performance. Crucially, many EM central banks demonstrated stronger policy discipline by raising rates aggressively earlier to combat inflation. 

This foresight resulted in significantly higher real yields (yield minus inflation) compared to the United States and Europe, which continue to grapple with persistent inflation risks. 

Furthermore, fundamental indicators like the debt-to-GDP ratio for nations such as Brazil and Mexico compare favorably with many debt-laden developed countries, which might have been attracting more investors toward them. 

Meanwhile, a weakening U.S. dollar has made dollar-denominated debt more affordable for emerging economies, thereby boosting the value of their local assets for foreign investors.

Bond Yields Outshining Volatile Equities

With volatility in the United States and developed-market equities intensifying in recent times, fueled by stretched valuations, high concentration in a few technology large and mega-caps, and unfavorable policy shifts, many investors have started to seek more predictable income streams. With the emerging nations offering more stability than developed markets, investors gradually turned toward EM bonds.

Consequently, EM bond ETFs have been outperforming other dollar bond categories in 2025, supported by attractive yields, improving credit quality and a weaker U.S. dollar that has bolstered local-currency debt. As per a report by VanEck, as of May 31, 2025, EM bonds yielded 7.5%, a 2.8% increase over the broad U.S. bond market and more than 3% above the 10-year U.S. Treasury bond yield.

Thus, for investors looking to harness these trends without the complexity of picking individual issues or countries, keeping the following three emerging market bond ETFs in focus before 2025 ends can be a practical way to access the theme with built in diversification, liquidity and transparent pricing.

iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB Quick QuoteEMB - Free Report)

This fund holds assets worth $15.87 billion. The emerging economies of Turkey (4.22%), Brazil (3.73%) and Mexico (3.70%) hold the top three spots in this fund. 

EMB has gained 13.7% year to date. The fund charges 39 basis points (bps) in fees. 

Vanguard Emerging Markets Government Bond ETF (VWOB Quick QuoteVWOB - Free Report)

This fund holds assets worth $5.4 billion. Emerging markets hold 97.12% of the assets of this fund.

VWOB has risen 13.5% year to date. The fund charges 15 bps as charges. 

Invesco Emerging Markets Sovereign Debt ETF (PCY Quick QuotePCY - Free Report)

This fund has a net asset value of $21.85. The emerging economies of Pakistan (3.22%), Nigeria (1.13%) and Egypt (1.12%) hold the top three spots in this fund. 

PCY has surged 17% year to date. The fund charges 50 bps as charges.