The iShares JPMorgan USD Emerging Markets Bond fund, an index product that tracks the sector, has a trailing 12-month yield of 4.33 percent. Top holdings include bonds from Turkey, the Philippines and Colombia.
Despite the opportunity, not a lot of money has flowed into emerging market or international bond funds this year.
Emerging markets-focused bond mutual and ETF funds have only increased their assets by 1.72 percent in 2014, according to data from Morningstar, and manage just $86 billion. Funds that allocate to all types of international bonds manage $207 billion and gained 5.91 percent this year. By comparison, popular intermediate-term U.S. bond funds managed by PIMCO and others run $1.02 trillion, up 2.6 percent in net assets this year.
Investors may be generally overlooking international bonds.
"We've always thought that international bonds should be a large part of investors' portfolio," Barrickman of Vanguard said. "They make up about 35 percent of the capital markets, so it's a huge, huge asset class that has probably been under-represented for while."
Vanguard, Barrickman said, recommends investors have about 20 percent of their overall fixed income allocation in international bonds.
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Patricia Oey, a senior analyst at Morningstar who focuses on ETFs, said investors should be aware of volatility in emerging market bonds.
She said investors looking for smaller ups and downs should consider ETFs denominated in U.S. dollars or other so-called "hard currencies" that are seen as better stores of value. They typical yield around 4 percent while a 10-year U.S. Treasury bill yields 2.58 percent as of Friday.
Oey added that local currency EM bonds, which can yield around 7 percent, have "good long term fundamentals" including strengthening local bond markets, low debt, and faster GDP growth. But she said they "will likely be quite volatile" in the near term and are "probably not suitable for the average investor."