Exploit Weak Dollar With a Foreign Bond ETF

I have been clamoring publicly for foreign bond ETFs since last December and we finally have one in the SPDR Lehman International Treasury Bond ETF (BWX Quote).

If you own foreign stocks or stocks funds, you already know the diversification benefits of international exposure. Those apply to bonds, too. In general terms, keeping a portion of your bond portfolio in foreign issues protects against a falling dollar. Depending on how narrowly you invest, it can also provide exposure to a specific currency that looks to be fundamentally strong.

BWX is a broad-based product with exposure to 17 different countries (13 developed countries and four emerging markets; five if you think of Greece as emerging). The fund allocates large percentages to Japan (22.79%), Germany (12.71%) and Spain (12.16%). The other countries get much smaller weightings from there.

The fund weights Japan heavily because the country has a lot of debt outstanding.

All of that exposure to Japan does mean BWX has a low yield, but not that low. The low rates from Japan are offset to some degree by higher yields from South Africa, Mexico and Poland. The mix of different yielding countries nets out to a current yield for the fund of 3.56% (4.06% for the index less a 0.50% expense ratio).