International Bonds

YOU SHOULD THINK of international bond funds not as a standalone investment, but as a further way to diversify a portfolio.

An international bond fund can potentially post gains either because foreign interest rates decline, pushing up the price of existing bonds, or because the dollar declines in value. Many international bond funds don’t hedge their currency exposure. But some funds do hedge, either occasionally or all the time. This will make the funds less volatile, which might appeal to conservative investors.

Among providers of exchange-traded funds, BlackRock’s iShares and State Street’s SPDR have an extensive array of international bond funds. Meanwhile, you can purchase international or global bond mutual funds from companies such as American Century Investments, Fidelity Investments, T. Rowe Price Group and Vanguard Group. International funds invest exclusively abroad, while global funds own a mix of U.S. and foreign securities.

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