Global bond funds

[LOL!]

The latest edition of S&P's The Outlook highlights several global bond funds at a time when I am rebalancing some equity fund assets to bond funds.

Top no-load 3-year funds in this category: PGYCX, SHYOX, PDVDX, OIBCX, and TEGBX. Top 5-year funds are OIBCX, TEGBX, SHYOX, BEGBX, and LSGlX.

My question is whether one really needs any global bond fund? I have seen BEGBX mentioned here. I also see that Vanguard doesn't have a fund in this asset class or do they?

Furthermore, I would have to reduce Vanguard S&P500, PrimeCap and/or WindowsII to increase fixed income assets, so which would you choose to cut back on and why? And if you had to pick a Vanguard bond fund for a tax-deferred account, which one would you go for? Short-term? Intermediate term? GNMA?

Maybe this is a little too much of "pimp my portfolio", but all responses are welcome. Thanks!

 

[saluki9]

1. I believe that most people should have a non-USD bond fund both to hedge exposure to the USD and to gain exposure to another yield curve besides ours here.

2. Vanguard does not agree and therefor does not offer one of these funds.

3. If I were to pick a vanguard fund for a deferred account it would be either short term investment grade or the TIPS fund

4. As for which fund to sell, well whatever would put you back at your target allocation.

 

[ats5g]

LOL,

If you want a pure int'l unhedged bond fund, in addition to BEGBX, have you checked out:

T. Rowe Price International Bond [can buy directly from TRP as well as in brokerage acct]

or PIMCO Foreign Bond (Unhedged) Institutional [you can probably by this fund in a brokerage acct for a transaction fee]

I wonder when Barclays is going to launch a foreign bond ETF?

- Alec

 

[ats5g]

saluki9,

Are there ETFs for foreign bonds, like European govt bond ETFs, somewhere in the world?

If so, how hard would it be for an American living in the states to purchase these? I would imagine it's pretty frickin' hard since most of these are likely listed in places like London.

thanks,
Alec

 

[Gone4Good]

I'm beginning to question the wisdom of an international bond allocation. I own LSGLX and don't see any real benefit. I can get FX exposure through my international equity position. It seems to me that the global bond funds all charge very high expenses which absolutely kill fixed income returns. Loomis, for example, has a 30-day yield of just 3.4% but 1% in expenses. So if the underlying portfolio yields 4.4%, Loomis is taking a whopping 22% of my expected future returns. That is a lot to pay for a little FX exposure.

The T. Rowe fund has a yield of 3.38% and 0.86% in expenses - T. Rowe is taking 20% of your expected future returns.

The PIMCO fund is better. It has a yield of 3.52% and expenses of 0.5% - PIMCO is taking only 12% of your expected future returns.

Vanguard Total Bond Fund Admiral Shares has a yield of 5.29% and expenses of 0.11% - Vanguard is taking 2% of your expected future returns.

 

[brewer12345]

3yrs, I think you are making the mistake of assuming that yield = total return.

 

[Gone4Good]

3yrs, I think you are making the mistake of assuming that yield = total return.

No. Yield = expected future return.

Held to maturity yield = total return. Don't plan on trying to time the interest rate cycle and don't trust the portfolio managers to add value doing it.

Over the long-run expect FX to be a zero sum game, so not expecting any alpha there.

So yeah, basically I expect my bond funds to return their yield.

 

[brewer12345]

Over the long-run expect FX to be a zero sum game, so not expecting any alpha there.

I would say that this is the major difference in our outlooks. Having said that, I cannot wait for a non-USD etf.

 

[bpp]

Are there ETFs for foreign bonds, like European govt bond ETFs, somewhere in the world?

Yes, there are. I recall seeing at least one Euro bond ETF available in Europe.

If so, how hard would it be for an American living in the states to purchase these? I would imagine it's pretty frickin' hard since most of these are likely listed in places like London.

You might be able to do so through Etrade soon, but these would be PFICs, so you probably wouldn't want to do so in a taxable account.

 

[mikew]

www.ishares.net

iShares € Corporate Bond
iShares € Government Bond 1-3
iShares € Government Bond 3-5
iShares € Government Bond 7-10
iShares € Government Bond 15-30
iShares € Inflation Linked Bond
iShares £ Corporate Bond
iShares £ Index-Linked Gilts
iShares FTSE UK All Stocks Gilt

 

[LOL!]

Thanks everyone for the comments, but now I do not need to rebalance from equities to bonds because my equities took care of that for me.