International bond exchange traded funds allow investors to diversify their portfolios or to fill out a targeted investment strategy.
ETFs that track international debt securities help investors meet a number of investment goals, writes William Baldwin for Forbes.
For instance, the iShares International Treasury Bond ETF (IGOV) , which tracks bonds denominated in local currencies issued by foreign governments in developed markets outside the U.S., provides investors with a play on a weakening U.S. dollar. The ETF has a 7.03 year duration and a 0.98% 30-day SEC yield. [ETF Spotlight: International Treasury Bonds]
Many U.S. investors tend to have a home bias, forgoing exposure to international investments. International bond ETFs help investors diversify and gain access to a range of different global fixed-income assets.
The Vanguard Total International Bond ETF (BNDX) provides broad exposure to international debt, including foreign investment-grade government, corporate and securitized debt. Additionally, the fund hedges its currency exposure, which can diminish volatility attributed to the Forex market. BNDX has a 6.8 duration and a 1.35% 30-day SEC yield. [This International Bond ETF Hedges Currency Risk]
More yield-hungry investors can also gain access to international junk bonds through the iShares Global High Yield Corporate Bond ETF (GHYG) , which tracks local currency-denominated high-yield corporate bonds issued by international companies. GHYG has a 3.74 year duration and a 3.89% 30-day SEC yield.
Investors who want to breakdown their overseas exposure can also focus on emerging market debt with the Vanguard Emerging Markets Government Bond ETF (VWOB) , which includes debt from countries like Russia, Mexico and Brazil, among others. While many may expect emerging markets to carry greater risks, these countries still issue high quality debt. The fund’s credit quality allocations include AA 7.1%, A 10.3% and BBB 60.5%. VWOB has a 6.7 year duration and a 4.25% 30-day SEC yield.
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.