Foreign Bonds Are Having A Very Good Year In U.S. Dollar Terms

Ex-US bond markets are demonstrating solid year-to-date gains, mirroring the strong rally observed in foreign equities. This positive trend within international fixed income is notably led by foreign corporate bonds, as evidenced by the performance of relevant ETFs through June 25.

Analysis

International bond markets are exhibiting solid year-to-date gains through June 25, mirroring the strong performance seen in ex-US equities. The rally in foreign fixed income is being led by corporate bonds, as indicated by the positive sentiment surrounding the Invesco International Corporate Bond ETF (PICB). This upward trend is not isolated to credit; it extends across various segments of the international bond market, including government inflation-protected securities (WIP), emerging market local currency bonds (EMLC), and international treasuries of both short (BWZ) and broad duration (BWX). The data suggests a broad-based appetite for non-US debt, reflecting positive market technicals and investor flows into international assets in a search for diversification and yield.

Key Decisions for Investors

• Investors looking to capitalize on the current momentum in ex-US fixed income should consider an overweight position in international corporate bonds, as this segment is demonstrating leadership in the rally.
• For a more diversified approach, consider a broad allocation across various international bond ETFs, including those tracking government (BWX), inflation-protected (WIP), and emerging market local currency debt (EMLC), to capture the widespread positive performance.