Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

International Bond

What it is:

International bonds are debt securities issued by foreign companies or governments and sold domestically.

How it works (Example):

Foreign companies or governments may issue bonds that are securitized and sold to domestic investors in the form of international bonds. These bonds are typically denominated and pay interest in the currency of the issuing country. Therefore, the value of the bond in the domestic currency will fluctuate depending on the economic conditions and exchange rates between the domestic country and foreign country.

Why it Matters:

International bonds can be used to hedge against currency and country-specific risks. For example, Americans invested in international bonds have reaped the gains from a falling U.S. dollar in recent years as it has made interest payments from foreign bonds worth more in dollar terms.