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Diversifying into foreign bond markets has been a win for US investors this year, based on a review of a set of ETFs through Aug. 27's close. The Vanguard Total Bond Market ETF, a proxy for government and investment‑grade corporates, is essentially flat, posting a fractional 0.2% rise.
Market gauges of inflation-adjusted borrowing costs have shot to their highest in more than a decade across major economies as AI companies and governments ramp up bond sales, raising risks for stock markets and the world economy.
South Korea and Taiwan are grabbing the majority of financial news headlines when it comes to international exposure, but a peek inside Latin America reveals potential opportunities. Brazil, in particular, could be offering investors ample value in both equities and bonds beyond those aforementioned countries already benefiting from the artificial intelligence (AI) buildout.
Here is a thesis that flips the bond world on its head: the volatility everyone fears in emerging markets has migrated to developed markets, while the yield premium for owning EM debt has stayed put.
Japanese investors became net sellers of foreign stocks in April for the first time in four months, as concerns over rising energy costs linked to the Iran war and broader inflation risks weighed on sentiment toward overseas equities. Data released by Japan's Ministry of Finance on Wednesday showed that investors sold a net 636.4 billion yen ($4.04 billion) worth of foreign stocks during the month.
The Invesco Emerging Markets Sovereign Debt ETF (NYSEARCA:PCY) has quietly become one of the better-performing fixed income vehicles of the past year, returning 16% over the trailing twelve months as the Federal Reserve cut its policy rate by 75 basis points and risk appetite returned.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:EMB | EMB Price Prediction) closed at around $96 today, capping a 12% total return over the past year and a quieter 1% gain year to date.
Most US investors hold bonds priced in dollars, which means their fixed-income returns rise and fall almost entirely on what the Federal Reserve does next.