Investors Should Prioritize Non-US Bonds, Strategist
SkimNews Take
Higher yields from rate-hiking central banks give investors a carry cushion if growth slows, while any currency strength against the dollar compounds the return—turning a bond allocation into a dual income-and-FX position.
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Allspring Global Investments' George Bory is pushing fixed-income clients toward government bond markets outside the US — specifically the UK, Europe, and Australia — where central banks are actively tightening or have distinct inflation dynamics.
- The European Central Bank raised its rate 25 basis points to 2.25% on June 11, its first rate hike since September 2023, according to Bory, who expects more moves unless the Fed validates them.
- The Federal Reserve hasn't raised rates since July 2023, and the CME FedWatch gauge shows a 78% probability of a December hike, dropping to 68% for January 2027.
- Bory recommends short-to-intermediate duration developed-market government bonds, arguing that mixing international duration with US duration lets investors 'play different rate cycles' simultaneously.
- BlackRock's Steve Laipply, global co-head of iShares Fixed Income ETFs, echoes the overseas tilt, pointing to European fixed-income securities offering lower risk and higher yields.
- Bory flagged that many bond investors remain 'very US-centric' despite the global bond market being 'massive,' urging diversification across duration, credit risk, and security selection.
Why it matters: For US-centric bond investors, the rate cycle gap is a concrete opportunity: the ECB has already moved and may do more, while the Fed hasn't hiked since July 2023, with only a 78% chance of a December move priced in. Allspring's Bory says pairing non-US duration with US duration captures two tightening cycles at once — a trade most American bond portfolios still aren't making.
