Many experts worry about the safety of sovereign debt in developed economies such as Greece, Ireland and Spain.
But Barclays Capital is at the other end of the spectrum.
It recommends the debt of Venezuela, which is ruled by a volatile dictator; Argentina, whose government is in a standoff with the central bank president it seeks to remove; and Ukraine, which endures great political instability amid national elections.
“Venezuela's foreign exchange reforms/devaluation, Argentina's central bank affair, Ukraine's elections or Turkey's (International Monetary Fund) prospects, promise to generate the greatest sources of returns," Barclays wrote in a report to clients, according to The Wall Street Journal.
Since Jan. 1, investors have left more stable emerging-market bonds for riskier ones in search of higher yield.
Many are investing through exchange traded funds.
The PowerShares Emerging Markets Sovereign Debt Portfolio ETF’s top allocation is to Ukraine, followed by Indonesia, Venezuela, El Salvador and Turkey.
"Only in Argentina and Venezuela's debt remains some yield,” a New York hedge fund trader told The Journal.
“People are playing around very opportunistically."
Some experts say the emerging market play is overdone.
“Emerging market sovereigns have rallied sharply, and investors are a bit concerned that the spreads are too low,” Rajeev de Mello, head of Asian investment for Western Asset Management, told Bloomberg.
“Fundamentals have improved, but the pricing has gotten much more expensive very quickly.”
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