Shooting for extra income? It can pay to venture offshore. Yields on bonds issued by foreign governments and companies often beat comparable U.S. rates. Moreover, central banks in Europe and Japan recently cut interest rates, while the Federal Reserve has embarked, gingerly, on the opposite path. Such divergences can make foreign bonds a better bet than U.S. bonds, which stand to lose value if rates continue to increase at home.
Earnings for All
- Bank Accounts: 1%-4%
- Municipal Bonds: 1%-3%
- Investment-Grade Bonds: 3%-5%
- Real-Estate Investment Trusts: 2%-6%
- Preferred Stocks: 4%-7%
- Closed-End Funds: 5%-11%
- High-Yield Bonds: 6%-8%
- Master Limited Partnerships: 5%-11%
Risks to your money. Swings in foreign currencies may be tough to overcome. If the dollar were to resume its ascent, bonds based in other currencies would likely slump. Moreover, even dollar-based foreign debt could slide if local economic conditions decline or interest rates climb. Companies and governments may also have a tougher time repaying their debts if the dollar gains value (making their local currencies worth less and hiking their interest costs).
Hire a pro. T. Rowe Price Global Multi-Sector Bond (PRSNX, 3.7%) holds half of its assets in foreign bonds, ranging from Canadian government debt to securities issued by companies such as Deutsche Bank and Schlumberger. At last word, 47% of the fund’s assets carried junk ratings or were unrated. That bumps up its yield but could magnify losses. Kiplinger 25 member Fidelity New Markets Income (FNMIX, 6.4%) keeps nearly all its assets in dollar-based securities, with 60% at last report in government bonds and 30% in corporate debt (the rest is in cash and stock ETFs). Also compelling is iShares J.P. Morgan USD Emerging Bond ETF (EMB, $110, 4.8%), which mainly holds government bonds issued in dollars. Emerging markets are highly volatile, though, and this fund, a member of the Kiplinger ETF 20, could hit some lengthy rough patches. (All prices and returns are as of March 31.)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Next: Preferred Stocks to Earn 4% - 7%
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Travel trends you can expect this summerThe Kiplinger Letter Domestic trips will trump foreign travel amid economic uncertainties, though some costs are down.
-
May Fed Meeting: Updates and CommentaryThe May Fed meeting came and went with little fanfare as Fed Chair Powell & Co. stuck to their data-dependent script toward interest rates amid tariff uncertainty. The May Fed meeting came and went with little fanfare as Fed Chair Powell & Co. stuck to their data-dependent script toward interest rates amid tariff uncertainty.
-
What Is the Buffett Indicator?"It is better to be roughly right than precisely wrong," writes Carveth Read in "Logic: Deductive and Inductive." That's the premise of the Buffett Indicator.
-
CPI Report Puts the Kibosh on Rate Cuts: What the Experts Are Saying About InflationCPI Consumer price inflation reared its ugly head to start the year, dashing hopes for the Fed to lower borrowing costs anytime soon.
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
CPI Report Keeps the Fed on Track: What the Experts Are Saying About Inflation
CPI Disinflation in key areas of consumer prices should help the Federal Reserve stick to its policy path of gradual cuts to interest rates.
-
Blowout December Jobs Report Puts Rate Cuts on Ice: What the Experts Are SayingJobs Report The strongest surge in hiring since March keeps the Fed on hold for now.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
CPI Report Casts Doubt on Rate Cuts in 2025: What the Experts Are Saying About Inflation
CPI November Consumer Price Index data sealed the deal for a December rate cut, but the outlook for next year is less certain.
