Displaying items by tag: bonds

Investor interest in international bonds has been accelerating, as July fund flows showed a marked uptick in overseas bond allocations, according to Morningstar data. This trend reflects a growing desire to diversify away from U.S. bond exposure, with Vanguard offering three compelling options for investors seeking global fixed income opportunities. 

A weaker dollar, pressured by expectations of falling rates, has further boosted the appeal of international assets, drawing more flows into global and emerging market bond funds. For those balancing domestic and global exposure, the Vanguard Total World Bond ETF (BNDW) offers nearly equal allocations between U.S. and international bonds at a minimal 0.05% expense ratio. 

Investors who prefer a pure international approach may turn to the Vanguard Total International Bond ETF (BNDX), which focuses on developed markets, or the Vanguard Emerging Markets Government Bond ETF (VWOB), which provides higher yields through EM sovereign debt. 

Finsum: Total bond funds present flexible avenues for enhancing portfolio diversification and capturing income beyond U.S. borders.

Bond markets have been volatile lately, but some multisector bond funds have managed to deliver stronger returns than the broader bond market. These funds diversify across different fixed-income sectors, such as government, corporate, high-yield, and foreign bonds. 

Over the past year, the category has returned 5.93%, better than the Morningstar U.S. Core Bond Index’s 5.66%, and it has also outperformed over three- and five-year periods. A screen for the best performers by one-, three-, and five-year results highlighted three actively managed funds: Axonic Strategic Income Fund (AXSIX), DoubleLine Flexible Income Fund (DFFLX), and NYLI MacKay Strategic Bond Fund (MSYEX). 

Each has topped peers recently, with returns ranging from about 7% to nearly 8% over the last year. 

Finsum: For investors looking to reduce volatility while maintaining competitive returns, these funds show the potential benefits of a multisector approach.

The Fed’s latest 25 basis point rate cut was widely expected, but uncertainty lingers over how aggressive or conservative future policy will be. While the Fed currently projects only one cut in 2026, that could shift depending on economic data, leaving investors cautious on yield. 

This makes high yield municipal bonds an option worth considering, given their tax advantages and potential return relative to corporates. An active fund like the Invesco Rochester High Yield Municipal ETF (IROC) offers exposure with a 30-day SEC yield of 4.69% and a 12-month distribution rate of 4.43%. 

Active management is key in this space, as it allows portfolio managers to adapt holdings to evolving conditions and manage risk. 

Finsum: Taking an active approach when you can see the macro uncertainty start to creep up is a good strategy in fixed income. 

Expectations of rate cuts have weighed on the dollar, boosting international stocks and bonds and driving flows into global and emerging-markets bond funds. For investors who want both U.S. and international exposure, the Vanguard Total World Bond ETF (BNDW) offers a nearly even split between domestic and global bonds, with a low 0.05% expense ratio. 

Those who prefer a purer international allocation might look to the Vanguard Total International Bond ETF (BNDX), which focuses on investment-grade developed markets and carries just 7% emerging-markets exposure. 

Investors willing to take on more risk for higher yield can consider the Vanguard Emerging Markets Government Bond ETF (VWOB), which tracks U.S.-dollar-denominated EM government debt. VWOB’s expense ratio is higher at 0.15%, but its 30-day SEC yield of 5.88% may appeal to income seekers. 

Finsum: These funds provide tools to diversify fixed-income portfolios beyond U.S. bonds while balancing risk and return.

Bond funds delivered modest results last year, with the average fund returning 4.8%, though nearly all finished in positive territory. Surprisingly, high-yield and emerging-market bond funds dominated the top performers, buoyed by strong global growth and favorable currency trends despite an inverted yield curve. 

Their outperformance suggests a speculative tone in markets, as riskier assets typically lag when investors grow cautious about the economy. However, higher volatility weighed on their ratings, leaving most of the top 20 funds with only “hold” grades, except for Delaware Pooled Trust High-Yield, which earned a B-minus.

In contrast, lagging funds saw declines in principal value, weak dividend payments, and overall “sell” ratings, with inflation-protected funds failing to meet expectations. 

Finsum: The divide highlights how chasing yield in riskier segments delivered gains last year, while traditionally safer strategies struggled to keep up.