Junk bonds of companies in emerging markets are the mostexpensive in seven years relative to the U.S., underscoringconcerns by policy makers from Mexico to the Philippines who saythe threat of asset bubbles is increasing.

Speculative-grade securities from nations including China andBrazil returned 14.8 percent since end-June, versus 9.4 percent inthe U.S., according to Bank of America Merrill Lynch indexes.Emerging-market yields fell to 7.3 percent from 9.3 percent a yearago even as net debt rose to a record 3.02 times earnings beforeinterest, taxes, depreciation and amortization, data compiled byBloomberg show. The median yield-to-leverage ratio of 2.4 compareswith 2.1 in the U.S., the smallest premium since 2005, the yearbefore developing-nation returns lagged behind.

“If global economic conditions remain sluggish, high-yieldcompanies will be at risk given their high leverage,” said BrigittePosch, an executive vice president at Newport Beach,California-based Pacific Investment Management Co., manager of theworld's largest bond fund. “Going forward being selective isextremely important.”