Top 5 Highest Yielding International Bond Mutual Funds (April 2011)

Investing in international bond funds is one of the best ways to balance the downturn in the US markets, since interest rate fluctuations differ from country to country. This is because they show little correlation with domestic equities and only moderate correlation with investment grade domestic debt. They also help in diversifying currency exposure and protecting assets against a long-term secular decline in the U.S. dollar. With their widely diversified holdings, mutual funds offer a secure route to investing in the international bond market.

Below we will share with you the 5 highest yielding Zacks #1 ranked international bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

Mutual Fund Sec Yield
GMO Emerging Country Debt IV 8.51%
GMO International Bond III 8.27%
Pimco Emerging Local Bond 4.21%
Dreyfus International Bond A 2.26%
Columbia Emerging Markets Bond A 1.16%

GMO Emerging Country Debt IV (GMDFX) utilizes the majority of its assets to purchase emerging market debt securities issued by governments. It may also invest in companies with economic linkages to emerging markets and purchase foreign fixed-income securities. The international bond mutual fund has a ten year annualized return of 14.98%.

The international bond mutual fund has and an expense ratio of 0.53% compared to a category average of 1.31%.

GMO International Bond III (GMIBX) seeks to outperform its benchmark, the J.P. Morgan Non-U.S. Government Bond index. The majority of the fund’s assets are utilized to invest in bonds, either directly or through other GMO funds or derivatives. The international bond mutual fund returned 15.07% in the last one year period.

Thomas Cooper is the fund manager and has managed this international bond mutual fund since 1993.

PIMCO Emerging Local Bond (PEBLX) invests a large proportion of its assets in fixed-income securities denominated in currencies of emerging markets. The fund may also invest in options, futures and swap instruments. It may also invest in securities with economic linkages to emerging market countries. The international bond mutual fund has a three year annualized return of 9.44%.

As of December 2010, this international bond mutual fund held 256 issues, with 11.28% of its total assets invested in Pimco Fds Private Account Portfolio Ser%.

Dreyfus International Bond A (DIBAX) seeks capital growth and income. The fund invests at least 65% of its assets in foreign securities not denominated in U.S. dollars. Not more than 25% of its assets are utilized to purchase emerging markets securities; and a maximum of 5% may be invested in a single emerging market country. The international bond mutual fund returned 9.81% in the last one year period.

The international bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.09% compared to a category average of 1.14%.

Columbia Emerging Markets Bond A (REBAX) invests the majority of its assets in emerging market securities with generate fixed income. The fund may also consider for investment companies which derive a significant portion of their revenues from emerging markets. The international bond mutual fund has a three year annualized return of 10.56%.

Jim Carlen is the fund manager and has managed this international bond mutual fund since 2008.

To view the Zacks Rank and past performance of all international bond mutual funds, then click here.

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