PT  - JOURNAL ARTICLE
AU  - Delroy M. Hunter
AU  - David P. Simon
TI  - Benefits of International Bond Diversification
AID  - 10.3905/jfi.2004.391028
DP  - 2004 Mar 31
TA  - The Journal of Fixed Income
PG  - 57--72
VI  - 13
IP  - 4
4099  - https://pm-research.com/content/13/4/57.short
4100  - https://pm-research.com/content/13/4/57.full
AB  - Despite suggestions that diversification benefits have fallen in the recent decade, currency-hedged bonds provided U.S. investors significant diversification benefits over January 1992-September 2002. U.S. bond returns have become increasingly correlated with U.K. and German bond returns, but correlations have declined with Japanese bonds. The changing correlations are consistent with more synchronized business cycles, but correlations have not become high enough to threaten the gains from diversification. Nor are gains on a currency-hedged basis diminished during periods of weakness or increased volatility in U.S. or foreign bond markets. Risk-reward trade-offs for each bond market vary in a predictable manner, which underscores the potential benefits of international bond investing.