Many investors are currently holding negative yielding Eurozone sovereign bonds. Why not sell these and buy positive yielding US treasuries or UK gilts? Foreign bonds come with exchange rate risk and also interest rate risk. These can be hedged, but particularly for interest rate risk, it is costly. However, once US interest rates start to rise, some of the interest rate risk will be realised and the position could change.
About the authors
Economist Insights is written by Joshua McCallum and Gianluca Moretti. Joshua has been working at Global Asset Management with the title of Senior Fixed Income Economist since 2005. Prior to this, he worked at the UK Treasury as a macroeconomist. Gianluca joined Global Asset Management in 2010. Prior to this he worked at the Italian central bank.
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