With central banks globally looking to keep rates lower for longer, it can be difficult for investors with funds ‘trapped’ overseas by the high exchange rate to find a decent return. Here I’ll show two examples of where you can earn higher comparative returns than you can in Australia from names you’re familiar with.
I often hear clients talk about how they have money ‘trapped’ overseas earning low returns from term deposits in low interest rate environments like the US and the UK. They’d like to bring their money home however the strong Australian dollar makes that difficult, so, as a result, the cash is stuck earning term deposit rates in some case as low as 0.25%. They would like to earn more on their money, but with equity markets remaining volatile and offering low returns in jurisdictions like Europe, they’d like an alternative.
The nature of the bond market, and in particular for the large issuers like financial institutions, is that issuers need to raise funds in several markets, not just their home country. So names that you’re familiar with, and that you may already own, may also offer a fixed income alternative in other jurisdictions and, in many cases, may offer a better comparative return.