Tilting toward foreign bonds remains a winning strategy for US investors this year, based on a set of ETFs through Friday’s close (Aug. 22). The modest gain for a benchmark of US government and investment-grade securities has been no match for offshore bond markets in US-dollar terms.
The top performer year to date: , which is up 13.9%. The rally is far ahead of the , which clocks in with a moderate 4.9% total return so far in 2025.
Even the weakest foreign bond performer – corporates in emerging markets (EMCB) — is outperforming with a 5.9% rally.
A key factor for the offshore rally is the weak US dollar. The is down 9.9% year to date. All else equal, a lower greenback translates into higher offshore prices after translating into US dollar terms. Hedging foreign currency risk, in short, has been a hefty headwind this year for US investors investing overseas.
The technical profile for the US Dollar Index still looks bearish,…
