Vanguard Emerging Markets Government Bond Index Fund (VWOB)

With long end yields elevated, fixed income remains attractive across multiple segments. Rate cuts, corporate earnings, and stable credit markets are supportive to Vanguard's VGHY and VCIT.

The rate-cutting cycle is bringing more investors to international bonds to not only diversify, but gain attractive yields. That's especially the case when considering emerging markets (EM) debt.

EM bond ETFs like EMB, VWOB, and PCY might draw investor interest as high real yields and a weaker dollar lift emerging markets.

Dollar-denominated emerging market bonds offer some of the highest dividend yields in fixed-income markets today. VWOB is a simple index ETF focusing on these securities. It yields 5.9%, and has outperformed most bonds for several years.

The Vanguard Emerging Markets Government Bond ETF may be a mouthful, but it delivers a 5.7% yield with monthly distributions. The Vanguard Information Technology ETF has 45.6% of its portfolio concentrated in just three stocks.

Tightening credit spreads can create opportunities for fixed income investors to maximize in the current bond environment. In its latest iteration of Active Fixed Income Perspectives, Vanguard noted this spread compression across the full credit market spectrum during Q3.

One Vanguard ETF is a promising option for income seekers.

As noted by TMX VettaFi Head of Research Todd Rosenbluth, fixed income ETFs are having a banner year amid record inflows. The Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX) were two of the top funds responsible for the $325 billion in net inflows (as of October 15).

The Vanguard Emerging Markets Government Bond Index Fund ETF invests in USD-denominated debt issued by emerging market governments. While the GDP growth outlook for emerging markets is marginally weaker in 2026, major VWOB holdings such as Saudi Arabia, Mexico, and the United Arab Emirates are forecast to outperform. VWOB has delivered stronger returns relative to U.S. treasury-focused ETFs such as IEF both in 2025 and over the past decade.

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.

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.

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.