The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Portfolio Strategy: US bond investors look abroad

Rising interest rates and a weakened dollar inspire U.S. bond investors to look abroad. But foreign forays are not without risk.

This article appears courtesy of

Leaving Home By Eric Uhlfelder 08/13/06 The wiliest U.S. bond investors have hit the road. Global debt portfolios have significantly outperformed their U.S. counterparts, reports Morningstar, the Chicago-based research firm. Over the three years through August 2, global bond funds outperformed U.S. intermediate-term bond funds by an annualized 198 basis points; over the past five years, they have returned nearly 300 basis points more annually.

What explains the relative strength of foreign bonds? First, interest rates in other developed countries are not rising as fast as those in the U.S., which means that bond prices are not falling as rapidly. As of early August the FTSE U.S. government bond index was yielding 5.12 percent. The only developed-market sovereigns paying more were those of Australia and New Zealand. Second, many foreign currencies are appreciating against the dollar, which translates directly into gains for dollar-based investors.

Bond investors in the euro zone, Japan, the U.K. and even Canada have seen domestic negative total returns so far this year through May. But as Joseph Di Censo, global fixed-income strategist at Lehman Brothers, explains, “When you factor in the falling currency, dollar-based returns are solid, led by sterling bonds, up 7.03

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree