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International Bonds
Old 04-22-2007, 05:57 AM   #1
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International Bonds

We have 30% of our portfolio in bond MFs. About 25% of the holding is in VG Intermed bond index. about 18 % VG Tip fund and 5% in VG LTB index.

The other 52% is in PTTRX. It looks like that PTTRX gets us some international bond exposure. It looks like it is mainly in cash right now.


Do you think PTTRX gets us enough international exposure in bonds? It is actively managed... the manager moves around alot.

Plus, give some comments on the general mix of the bond allocation as described above. Anyone see any problems with it?

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Re: International Bonds
Old 04-22-2007, 08:46 AM   #2
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Re: International Bonds

interesting question. I look forward to seeing the replies. All my bonds are in Schwab total bond index in my 401(k), Fidelity Spartan bond index in DW's IRA and VG Intermediate tax exempt. I have 15% of my equities in international funds but have never considered international bond funds.

Is not holding international bonds a real risk? I have had a portfolio analysis by VG done fairly recently and no mention of my lack of international bonds.
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Re: International Bonds
Old 04-22-2007, 11:40 AM   #3
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Re: International Bonds

Larry Swedroe, a respected financial author, states that international bonds are nothing more than a currency play. I see no reason to hold bare dollars. The dollar, like the pound before it, has been the reserve currency for decades but I am concerned that this is slowly coming to an end. Thus, I have TRP's international bond fund because I want international exposure (which I have in equities of about 40%) to hedge my dollars.

That said, I think it is more of a personal quirk than a well reasoned investment strategy. I would think that international equities would provide plenty of international currency exposure. However, it is nice to offset the international risk with international equities. I currently hold 8% of my bonds in international bonds.

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Re: International Bonds
Old 04-22-2007, 12:38 PM   #4
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Re: International Bonds

Historically, non-USD bonds added to a traditional US equity and bond plus international equity portfolio have lowered volatility and maintained or increased returns.
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Re: International Bonds
Old 04-22-2007, 01:27 PM   #5
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Re: International Bonds


What I don't like about emerging/international bonds right now is that the yields are so low. e.g. PEBIX, an emerging market bond fund is at 5.35%, ESICX, which invests in foreign government debt, is around 2.5%. I've been getting out of mine until I see more of a risk premium vs. US bonds. As it stands now, you're making a pure currency/weak dollar play going international.

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Re: International Bonds
Old 04-22-2007, 03:06 PM   #6
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Re: International Bonds

I use a multi-sector bond fund to invest in foreign bonds. FSICX specifically. That way I rely on the fund manager to know when and where to invest. I quit holding sector specific bond funds a while back in favor of more diversified bonds funds such as general "core" bond funds that hold a mix of govt and corporate, and "total return" type bond funds that provide exposure to some of them more esoteric bond classes. I no longer hold a specific TIPs, treasuries, gnma, high-yield, international etc., bond fund.

Obviously your PTTRX is in the "total return" type bond fund category.

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Re: International Bonds
Old 04-22-2007, 05:54 PM   #7
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Re: International Bonds

I keep the same domestic/foreign ratio with my bonds as I do with my stocks. I think of it as providing an extra bit of insurance, and foreign bonds provide a more direct kind of currency exposure than foreign stocks do. But it probably won't make a whole lot of difference over the long run, and I would not pay a high expense ratio to do it.
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Re: International Bonds
Old 04-22-2007, 07:27 PM   #8
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Re: International Bonds

Quote:
Originally Posted by Will Work 4 Beer
What I don't like about emerging/international bonds right now is that the yields are so low. e.g. PEBIX, an emerging market bond fund is at 5.35%, ESICX, which invests in foreign government debt, is around 2.5%. I've been getting out of mine until I see more of a risk premium vs. US bonds. As it stands now, you're making a pure currency/weak dollar play going international.

WW4B
Oh well, in that case I hate US stock indexes because they pay such low yield.

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