Posted on 06 November 2011.
When it comes to investing in the bond market, investors need not be limited by the same old boring, low-yielding U.S. Treasuries or high grade corporate issues because there’s a new sheriff in town: International bond ETFs. Bonds may seem boring on the surface, but bond ETFs account for a significant percentage of ETF assets under management. At the end of September, regular long bond ETFs listed in the U.S. had over $162 billion in assets under management.
Part of that comes from international bond ETFs and the smart money is on international bond ETFs continuing to attract a growing number of ETF assets as more investors realize the profit potential of investing in global fixed income issues.
Part of the allure of an international bond ETF stems from the fact that in an environment of low interest rates, the yields on 10- and 30-year U.S. Treasuries have been flirting with multi-decade lows. Income investors heading over to high grade corporate bonds will find the yields to be barely more appealing than with Treasuries. It’s almost as if investors are forced to consider an international bond ETF.
Fortunately, there’s a growing number of international bond ETFs for investors to choose from. Some can even kill two birds with one stone by providing investors with exposure to global bonds and emerging markets in one fund.
Van Eck’s Market Vectors ETF business has become a prodigious issuer of international bond funds. The Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: EMLC) offers exposure to emerging markets bonds not denominated in dollars. Investment grade issues from countries such as Brazil, Mexico and Poland are found in this ETF.
Another international bond ETF to consider is the Market Vectors LatAm Aggregate Bond ETF (NYSE: BONO). At the currency level, BONO features bonds denominated in dollars, euros and several Latin America currencies. Still another international bond ETF to consider is the iShares JPM Morgan USD Emerging Markets Bond ETF (NYSE: EMB), which features emerging markets dollar-denominated bonds.
If you want to get involved with the new craze in international bond ETF, check out the wave of newly minted “dim sum” funds that feature bonds denominated in Chinese Yuan.
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