Passive investors are driving returns in emerging-market debt like never before.

Want proof? Check Google.

Bank of America Corp. says online searches are a leading indicator of performance in developing-market bonds, with the relationship particularly pronounced in dollar debt.

The logic behind these striking claims runs like this. As exchange-traded funds have doubled in size over the past two years, asset prices are moving to the ebbs and flows of passive allocations amid relentless uptake from retail and institutional investors. Trawls on Google, surprisingly, are a bellwether for both flows and returns, the bank argues.

“We find external debt to be most affected by ETF flows,” strategists led by David Hauner wrote in a report Tuesday. “Our statistical analysis suggests that ‘Google’ searches for ‘emerging markets’ are a leading indicator of returns of EM asset classes.”

The relationship between Google searches and performance is especially notable in dollar-denominated EM debt, which is dominated by offshore investors and can prove particularly illiquid. That explains why the asset class is likely to be more sensitive to internet inquiries and flows of the ETF variety, according to the bank.

Credits like Pakistan, Mexico, the Philippines and Ukraine stand out for their particularly high correlations as passive instruments hold a larger share of their outstanding debt, the strategists said.

Passive ETFs don’t have the same flexibility as active funds when it comes to positioning against rising bond yields, making them vulnerable to outflows, the bank warns. This could spell trouble should markets turn.

“As the credit cycle matures, outflows from debt ETFs are becoming an increasing risk for market liquidity,” Hauner and team wrote. “The bouts of outflows that interrupted the relentless inflow of the past couple of years highlighted that markets are not well positioned to absorb concerted ETF selling.” — Bloomberg