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International Bond Funds?
Old 12-30-2009, 12:46 PM   #1
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International Bond Funds?

I was listening to a podcast of a Kiplinger financial show earlier today in which a few "experts" talked about the outlook for the economy in 2010 and how to react investment-wise. One thing mentioned, which I had previously considered, was putting a portion of one's bond allocation into an international bond fund (T. Rowe Price and, I believe, a Matthews fund were mentioned.) It was toured as a partial hedge against a falling dollar relative to foreign currencies which is what I had been thinking myself. And also because, just as with stocks, the action is more international these days.

Any experience, positive or negative, with such funds? Any ideas on what percentage of a bond allocation to allocate to international? Any particular funds anyone has had good experience with? (Vanguard doesn't have an international bond index fund which is what I would automatically gravitate toward if they did.)

Thanks. (If this has been discussed before, someone please just point me to the discussion.)
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Old 12-30-2009, 01:09 PM   #2
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There are an AWFUL lot of people (over at Bogleheads) who think there's
no reason for foreign bonds, that you hedge the dollar just as well with a hefty
slice of foreign equities. They pretty much convinced me, even though they
fail to explain why this rationale does not speak against the need for a FTSE
All-World Except US Smallcap fund, which is all the rage.
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Old 12-30-2009, 02:12 PM   #3
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I own the Loomis Sayles Global Bond fund and am thinking hard about deep sixing it. I get all of the added volatility due to FX changes but none of the excess return. It may be that the higher fees associated with these bond funds are just too much (Loomis is 1%) to overcome, even in a declining USD environment.

Here's a chart I posted in another thread comparing the 5-year total returns of Vanguard's bond index fund against both the Loomis and T. Rowe international funds. The green line is the bond index.

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Old 12-30-2009, 02:34 PM   #4
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Personally, I think they are a valuable diversifier and I like having some exposure in a diversified portfolio. Of course, they also make a reasonable trading vehicle if that turns your wheels.

The ones I use are usually GIM if it is selling at a 5% or better discount to NAV, or BEGBX.
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Old 12-30-2009, 05:00 PM   #5
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I have a position in LSGLX. It kicks off 5% or so and global bonds offer diversification as brewer says. I'll keep it just for those reasons.
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Old 12-30-2009, 06:33 PM   #6
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I am toying with adding int'l bond funds as I try to get more conservative in my portfolio (60/40 to 40/60). I have looked at the PIMCO Int'l Bond fund unhedged.
This was touted in the Bonds for Dummies book. This is for further diversification of the bond side.

Thinking
Bonds:
30% TIPS
20% GNMA
20% Intermediate Bond Indx fund
15% Stable Fund (in 401k)
15% Pimco Int'l Bond fund, unhedged

Still in the thinking stage ... percentages might change. Timely thread for me. Thanks.
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Old 12-31-2009, 02:57 PM   #7
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Quote:
Originally Posted by megacorp-firee View Post
I am toying with adding int'l bond funds as I try to get more conservative in my portfolio (60/40 to 40/60). I have looked at the PIMCO Int'l Bond fund [B]unhedged./B]
This was touted in the Bonds for Dummies book. This is for further diversification of the bond side.

Thinking
Bonds:
30% TIPS
20% GNMA
20% Intermediate Bond Indx fund
15% Stable Fund (in 401k)
15% Pimco Int'l Bond fund, [B]unhedged/B]

Still in the thinking stage ... percentages might change. Timely thread for me. Thanks.
I'm curious what you mean by "unhedged" following the name of the bond fund.
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Old 12-31-2009, 03:26 PM   #8
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I have only a small amount of my total in bond funds, but it is 50/50 international in an ETF, BWX: BWX: Summary for SPDR BARCLAY INTL TB- Yahoo! Finance

Yield is only 0.78% today.
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Old 12-31-2009, 03:37 PM   #9
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Quote:
Originally Posted by friar1610 View Post
I'm curious what you mean by "unhedged" following the name of the bond fund.
PIMCO has two int'l bond funds; one is hedged and the other not.
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Old 12-31-2009, 03:50 PM   #10
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Originally Posted by friar1610 View Post
I'm curious what you mean by "unhedged" following the name of the bond fund.
As MichaelB said, Pimco has 2 funds. In the hedged fund, they actually go out to the currency markets and 'hedge' the currency risk.

You buy the unhedged fund when you want to take the currency exchange risk (you think the dollar is going to get weaker and the foreign currency will get stronger)
You buy the hedged fund when you think that the dollar is going to be stronger.

I believe that the dollar is going to lose ground in the near term future.
I wanted to adjust my bond aa and rather than go out and buy some foreign currencies too, I will use the Pimco unhedged fund to 'bet' on the US dollar weakness.

You can also 'bet' that way if you buy a bunch of international/emerging stock funds or in a lesser degree US multinationals that have a bunch of overseas revenues.

Just trying to get more diversification in my portfolio
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Old 12-31-2009, 03:54 PM   #11
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Originally Posted by MichaelB View Post
PIMCO has two int'l bond funds; one is hedged and the other not.
Depending on what you intend with your bond asset allocation, Pimco also has global bond funds and developing market bond funds.
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Old 01-01-2010, 08:20 AM   #12
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Personally, I think they are a valuable diversifier and I like having some exposure in a diversified portfolio. Of course, they also make a reasonable trading vehicle if that turns your wheels.

The ones I use are usually GIM if it is selling at a 5% or better discount to NAV, or BEGBX.
Hey Brew,

Can you give me the website that shows or makes it easy to see whether CEF's are selling at discount or premium to NAV. I can't find it.

thx

Wally
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Old 01-01-2010, 08:29 AM   #13
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