info
On Independence Day, the New York Stock Exchange and Capital Group’s U.S. offices will be closed.

In observance of the Independence Day federal holiday, the New York Stock Exchange and Capital Group’s U.S. offices will close early on Wednesday, July 3 and will be closed on Thursday, July 4. On July 3, the New York Stock Exchange (NYSE) will close at 1 p.m. (ET) and our service centers will close at 2 p.m. (ET)

Categories
EM debt: Hard and local currency bonds provide different routes to returns
Kirstie Spence
Fixed Income Portfolio Manager
Harry Phinney
Fixed Income Investment Director

 


Capital Group fixed income portfolio manager Kirstie Spence and investment director Harry Phinney discuss the different attributes, as well as the risk and return profiles of local currency and hard currency bonds. Here are their key points:  

  • Local currency bonds behave more like rate securities, responding to changes in domestic interest rates and to the shape of the yield curve.

  • Local currency debt offers maturity with greater liquidity and a wider set of tools for portfolio construction. Currency appreciation can also potentially be a key source of return over the medium to long term.

  • Hard currency sovereign bonds essentially behave like a credit asset with the primary risks of default and liquidity.

 


You must be logged in to download the PDF.

DOWNLOAD PDF

Kirstie Spence is a fixed income portfolio manager with 28 years of investment industry experience (as of 12/31/2023). She is the principal investment officer for the Capital Group Emerging Markets Local Currency Debt LUX Fund and serves on the Capital Group Management Committee. She holds a master's degree with honors in German and international relations from the University of St. Andrews, Scotland.

Harry Phinney is a fixed income investment director with 18 years of industry experience (as of 12/31/23). He holds an MBA in international business from Northeastern University, a master’s degree in applied statistics and financial mathematics from Columbia University and a bachelor’s degree in international political economy from Northeastern University. 

The value of fixed income securities may be affected by changing interest rates and changes in credit ratings of the securities.

 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries.

 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.

 

Investing in developing markets may be subject to additional risks, such as significant currency and price fluctuations, political instability, differing securities regulations and periods of illiquidity, which are detailed in the fund's prospectus.

 

Investments in developing markets have been more volatile than investments in developed markets, reflecting the greater uncertainties of investing in less established economies. Individuals investing in developing markets should have a long-term perspective and be able to tolerate potentially sharp declines in the value of their investments.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
As of July 1, 2024, American Funds Distributors, Inc. was renamed Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.