Vanguard Emerging Markets Government Bond ETF

VWOB

Market cap $4.85B

The first interest rate cut of the year put fixed income investors on notice that the high-rate, high-yield environment they've been accustomed to is beginning to change. With that, emerging market (EM) bonds may be an option to consider when looking to diversify income and/or maximize yield potential.

As fund flows during the month of July indicated, more investors continue to head overseas in order to get international bond exposure according to data from Morningstar. For those looking to overcome their U.S. bond home country biases, Vanguard has three funds that are worthy of consideration.

With talk of rate cuts getting more audible, they almost seem inevitable. Indeed, the CME FedWatch is forecasting an almost 90% chance of cuts.

I hope you enjoyed a great July, whether you were on vacation or not. I've been catching up on the fantastic content our team at ETF Trends and ETF Database produced in July 2025.

When it comes to equities exposure, U.S. large-caps continue to garner the lion's share of capital allocations. However, emerging markets (EM) could finally be in the throes of a comeback.

I believe the macro environment in 2025 favors emerging market bonds, making Vanguard Emerging Markets Government Bond ETF interesting despite U.S. trade war rhetoric. I believe it's a very representative ETF for the emerging market space, even compared to more widely used ETFs like EMB. Despite President Donald Trump's tariff threats, VWOB has outperformed Treasuries, making the comparison with AGG particularly interesting.

As the prospect of rate cuts becomes more plausible, the buzz surrounding EM becomes more audible. That interest is also permeating into the bond markets for emerging market debt.

Exchange-traded funds (ETFs) are sort of like ice cream: There's a flavor that should appeal to every person.

Tariffs, inflation, geopolitical tensions, and other factors continue to feed into market uncertainty for even safe haven assets like Treasuries. As such, investors could be giving riskier emerging market (EM) bonds a second look.

Emerging market bonds offer investors particularly attractive yields, with the highest historical spreads in the market. VWOB is a simple index ETF investing in these securities. It has a good 6.3% yield, consistently outperforms its peers with moderate risk, and is a buy.