Answer quickly: which is riskier a corporate bond or a government bond? The natural answer would be a corporate bond. The logic is that you can use the sovereign bonds (local or external) as the baseline to price the companies from the same country and the companies are in some extent exposed to the economy. And with a few exceptions, like big solid exporters, this is true.
But if you tilt that question to where most of the people see more risk, or better adjusted returns, if in the Emerging Market Bond Index Global (EMBIG)/Government Bond Index-Emerging Markets (GBI-EM) or in the Corporate Emerging Markets Bond Index (CEMBI), the reality can be counter intuitive.
There are meaningful differences between CEMBI and sovereign based indexes that make CEMBI a lower volatile asset class, while still offering good returns versus the rest of the EM fixed income space.
Before my colleagues from the Emerging Markets Sovereign desk break relations with me, I must highlight the flipside of it as well.
For a strategic long term investor looking for EM exposure with lower volatility, but still good yields and returns, Emerging Markets Corporate bonds are a perfect match.