Vanguard's Emerging Markets Bond ETF Yields 6.05% While Carrying BB-Rated Credit Risk

An investor in the Vanguard Emerging Markets Government Bond ETF (VWOB) sees their annualized three-year total return drop from 8.01% to 5.42% after federal and state taxes are applied to distributions. This return is generated by a 6.05% 30-day SEC yield. The yield is produced by holdings in government bonds issued by emerging market countries such as Saudi Arabia, Mexico, Indonesia, and Turkey. These governments are generally less creditworthy than developed nations and must offer higher interest rates to attract investors. A portion of the bonds in the portfolio are rated BB or lower.