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Is OIBYX a Strong Bond Fund Right Now?

Zacks Equity Research

If you've been stuck searching for International Bond - Developed funds, you might want to consider passing on by Oppenheimer International Bond Y (OIBYX) as a possibility. OIBYX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes OIBYX as International Bond - Developed, a segment that is packed with options. Focusing on fixed income securities outside from developed nations besides the U.S. International Bond - Developed funds invest in assets from countries like Japan, Germany, the UK, France, and Australia. These holdings dominate the top holdings, and funds in this category offer geographic diversification; however, they can also introduce currency risk.

History of Fund/Manager

OIBYX is a part of the Invesco family of funds, a company based out of Kansas City, MO. The Oppenheimer International Bond Y made its debut in October of 2004 and OIBYX has managed to accumulate roughly $1.62 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 3.44%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 4.81%, which places it in the middle third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of OIBYX over the past three years is 6.81% compared to the category average of -7.06%. Looking at the past 5 years, the fund's standard deviation is 6.34% compared to the category average of -7.44%. This makes the fund more volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.

For those that believe interest rates will rise, this is an important factor to consider. OIBYX has a modified duration of 3.09, which suggests that the fund will decline 3.09% for every hundred-basis-point increase in interest rates.

Income

Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 6.34% means that a $10,000 investment should result in a yearly payout of $634.

A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.

Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. With a beta of 0.11, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, OIBYX has a positive alpha of 1.61, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, OIBYX has 38.9% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 31.42%, giving OIBYX an average quality of BBB. This means that it focuses on medium quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, OIBYX is a no load fund. It has an expense ratio of 0.77% compared to the category average of 0.93%. From a cost perspective, OIBYX is actually cheaper than its peers.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.

Bottom Line

Overall, Oppenheimer International Bond Y ( OIBYX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, Oppenheimer International Bond Y ( OIBYX ) looks like a somewhat weak choice for investors right now.

Don't stop here for your research on International Bond - Developed funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare OIBYX to its peers as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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