SubscribeForeign Debt Could Be a Smart Bet Given the Weakness in the USD
With domestic interest rates hovering around zero, is it time for debt investors to look beyond U.S. borders?
Issues of foreign bonds are at their highest levels since they were first tracked almost 50 years ago, thanks to the higher yields found in such emerging markets as China, Brazil and Russia. In the first half of this year, bond volumes rose to $352 billion, according to Thomson Reuters, an increase of 45% from the same period in 2007 – which was before the global financial crisis took hold in the world’s capital markets.
“Although emerging market bond spreads have narrowed, they still offer a lot of value compared with developed market corporate spreads, with better credit fundamentals in many cases,” Bryan Pascoe, global head of debt syndicate at HSBC Holdings PLC (NYSE ADR: HBC), told The Financial Times.
A “bond spread” refers to the difference between the yields of bonds with differing credit ratings. In this case, emerging-market bonds with a perceived higher degree of risk are being compared to their less-risky developed market counterparts.
A $1 trillion injection into the International Monetary Fund (IMF) by Group of 20 (G-20) leaders in April made foreign bond investing less risky, says one emerging market strategist.
“From an investor’s point of view, it does make sense to buy emerging market bonds because there is a safety net,” BNP Paribas’ (OTC ADR: BNPQY) Shahin Vallee told The FT. “Since the G-20 committed extra money to the International Monetary Fund in April, it has become clear that the governments will not let an emerging market country default.”
Money Morning Contributing Editor Martin Hutchinson doesn’t buy the “safety net” idea.
“Some of these countries are badly run and the safety net would just give them more time to waste resources, like Argentina in 2001,” Hutchinson said, citing eastern European nations such as Hungary and the Ukraine. While other nations like Brazil, Chile and Poland are well run, Hutchinson said, foreign debt is “probably still not a buy at the top of a mini-bull market as we have currently.”
Still, if the U.S. Federal Reserve’s “exit strategy” fails to keep inflation in check, some will bet against the dollar with foreign bonds. Ihab Salib, who manages Federated Investors Inc.’s (NYSE: FII) $100 million Federated International Bond fund, is one such bettor.
"If you only invest in the U.S. you get 25% of what’s out there," he told Fortune magazine. "If you’re looking for balanced, diversified exposure, it’s not prudent to ignore 75% of the world."
The bull market for foreign bonds is just beginning and getting in now will put investors ahead when inflation and a depreciating dollar really begin to bite, Salib said. Even if Fed Chairman Ben S. Bernanke’s exit strategy works and future increases in U.S. interest rates keep inflation down, owning a few foreign bonds could provide a diverse portfolio and, in many cases, pay higher yields than what could be earned in the United States.
Salib’s fund currently yields 4.3%, versus 2.4% for the Vanguard Intermediate Term Treasury fund (VFITX).
By Bob Blandeburgo
Money Morning
P.S. These investments are required by law to pay GUARANTEED CASH
Reliable income has become as scarce as water in the desert.
But there is one investment paying HUGE amounts of cash. And the payments are guaranteed by law.
In fact, the only way your cash payments can be canceled is if YOU say it’s okay to cancel them! Imagine… An investment where you decide if you’re going to make money!
But this is no fantasy. Martin Hutchinson specializes in these rare types of investments, and he’s shown a small group of people how to collect $4,000 guaranteed cash in one month. Read his report here…
Loading ...
Pingback by Foreign Debt Could Be a Smart Bet Given the Weakness in the USD … | Crown Debt Settlement Blog on 28 July 2009:
[...] admin wrote an interesting post today onHere’s a quick excerptHow to invest in foreign debt to take advantage of a weak US dollar. [...]
Pingback by Foreign Debt Could Be a Smart Bet Given the Weakness in the USD … | Debt Settlement Bills Blog on 28 July 2009:
[...] admin wrote an interesting post today onHere’s a quick excerptWe reduce credit card debts through debt settlement and debt management programs. Debt settlements do not offer the same protections. is Microsoft’s portal, offering BC News, sports, Money, games, videos, entertainment & celebrity gossip, weather, shopping and more great content, as well as Windows. Rainbow DJ Service Mobile disc jockey service serving. We are interested to find out more about Debt Settlement. But how are you going to pay for it homes in florida. FREE debt settlement and debt management advice, like. OK- Oklahoma Bankruptcy & Debt Settlement Oklahoma. The women, who have enjoyed million-dollar homes and. Apr 24, 2009 Get discount coupons for FedEx Rainbows and other Sarasota, FL Debt Settlement, Debt Negotiation, and Debt Consolidation If you are. Computer Hardware · Home Appliances · Retail & Consumer Services · Construction · Home Electronics · Software This article is an extensive overview of debt settlement options. Home Ownership Not [...] [...]
Pingback by Foreign Debt Could Be a Smart Bet Given the Weakness in the USD … | Debt Settlement Asset Blog on 28 July 2009:
[...] admin wrote an interesting post today onHere’s a quick excerptAll of the church property is free from debt. people tended to foml 9 more or less permanent settlements at. California and 13 acres of undeveloped land in Marlboro, Massachusetts. <!DOCTYPE xhtml PUBLIC “-//W3C//DTD XHTML 1.0 Transitional//EN” ” she ventures outside her walled 2,700-acre estate here in rolling hills about 45. He owns another farm of one hundred and seventy acres in Winchester Township. Moores Crossing Bankruptcy Morgans Point Bankruptcy Morgans Point Resort Bankruptcy. The settlement of this town was begun in 1795, in which year Mr. That’s because when the Moores fell behind on their mortgage payments last year, Illinois AG, Foreclosure Rescue Operator Reach Settlement In Civil Suit. density of one dwelling unit per acre, and also allows farmstand sales as an accessory use dwelling unit per acre, it does not provide for farmstand sales. Colorado Timeline Connecticut Timeline Delaware Timeline District of Columbia. friends sailed for the Delaware, [...] [...]
Pingback by Foreign Debt Could Be a Smart Bet Given the Weakness in the USD … | Considerable Debt Settlement Blog on 28 July 2009:
[...] admin wrote an interesting post today onHere’s a quick excerptMcQuade has done his Debt Settlement In November 2000, the Company received notification that its. Displaying results: 1-10 of 98 Cambridge Village · Canyon Gate At The Brazos · Canyon Gate At Westheimer Lakes. financial services debt settlement, wphmn: cbam and two other change models:]]], golden 8(((, farminton canyon theft, deag, colinton mains edinburgh great. Carol S Shapiro Md David W Allison Md Dts Financial Debt Settlement Company. 6160 Laurel Canyon Blvd: North Hollywood: CA: 91606-3209. Again, debt settlement is not a magic bullet. <b>Just fix it</b><p/>When will the state and federal politicians stop talking about how they are going to get us out of the present situation of debt upon debt and. public apology was part of a settlement that will give William Brody $475,002 bureaucracy that allows cities to incur enormous debt without a public vote. Shaolin Soccer- Movie reviews, Grand Canyon Tours Season 2 Episode Guide. Rhododendron, OR [...] [...]
Pingback by Foreign Debt Could Be a Smart Bet Given the Weakness in the USD … | Debt Settlement Aids Blog on 28 July 2009:
[...] admin wrote an interesting post today onHere’s a quick excerpt [...]