Foreign Bonds Lead US Fixed Income by Wide Margin | Bonds & Fixed Income

Global diversification for bonds has been a robust promote in recent times, however 2025 is one other story. Year to this point, fixed-income securities ex-US are outperforming the investment-grade US benchmark for bonds by a hefty degree, primarily based on a set of ETFs by Wednesday’s close (May 14).

Leading the rally: overseas inflation-indexed authorities bonds. SPDR FTSE International Government Inflation-Protected Bond ETF (NYSE:) is up 7.6% this yr. That’s a sizable premium over the 1.5% gain this yr through the US bond benchmark, primarily based on Vanguard Total Bond Market Index Fund ETF (NASDAQ:).

Three different overseas bond markets are posting year-to-date beneficial properties simply behind the chief. There’s a digital tie for second place with mid-7% will increase in 2025 for short-maturity overseas authorities bonds in developed markets (),  overseas corporates (), and authorities bonds issued in rising markets ().

The weakest foreign-bond performer in 2025: high-yield bonds in rising markets (), with a 2.1% rise, though that also exceeds the 1.5% increase for the US benchmark ().

A key issue for the outsized beneficial properties in overseas bonds this yr is the weak . In different phrases, hedging overseas currency risk as been a shedding proposition this yr. Note that Vanguard’s Total International Bond Market ETF (), which hedges forex risk, is up solely fractionally this yr.

The greenback’s hunch in 2025 may very well be a regular run of forex volatility, though some analysts see a regime shift unfolding that may have longer-term implications.

Harvard economics professor Ken Rogoff this week suggested that “My thesis is that the US dollar is about to get knocked down a couple pegs. It will still be first in global finance, because nothing is poised to fully replace it. The dollar just won’t be as unique as it once was,” stated the creator of the newly printed Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades of Global Finance, and the Road Ahead.

If Rogoff’s evaluation is appropriate, the relative power for overseas bonds could also be simply getting began.

Athanasios Vamvakidis, international head of G-10 overseas exchange strategy at Bank of America (NYSE:), just lately mused that a main shift in expectations for how the world views the US greenback is underway. “I don’t think we go back to where we were because I think the rest of the world has crossed a red line, and they will try to reduce dependence on the U.S. on trade, on defense and everything,” he informed Barron’s final month. In the wake of the US-launched trade struggle, “There’s no way back.”