Finding Yield in a 2% World

Abstract

Many investors are surprised to learn that the largest asset class in the world is foreign debt. US investors often allocate very little to foreign bonds, and when they do, it is through capitalization weighted indexes. These indexes allocate the highest weighting to countries with the most debt outstanding. Is there a better way to invest in global bonds? We examine a simple value approach applied to global sovereign bonds and find that it works well across decades. In a world of very low and even negative yields, a value approach could potentially add a well needed source of income to a diversified portfolio.

Keywords: bonds, stocks, etfs, value, global, sovereign, high yield, income, foreign bonds