RetireJapan

I'm thinking of selling my Vanguard Total International Bond Index Fund ETF (ER 0.07%) and buying either the 'ＮＥＸＴ ＦＵＮＤＳ 外国債券・ＦＴＳＥ世界国債インデックス（除く日本・為替ヘッジあり）連動型上場投信' etf (ER 0.132%) or the the 'ｅＭＡＸＩＳ Ｓｌｉｍ 先進国債券インデックス' fund (ER 0.17%) because the Vanguard ETF is usd hedged, whereas the NEXT FUNDS ETF is yen hedged, and the eMAXIS mutual fund is unhedged.

In terms of recent returns, the Vanguard had a dividend yield of 4.665% over the past year but it's market price fell 9.37% over the year in USD terms (but increased by 3.96% or so in Yen terms), the NEXT FUNDS ETF had a dividend yield of 2.32% but its market price fell 7.32% over the year, and eMAXIS's non-distributing developed market bond index fund increased its base price by 14.46%.

I suppose a lot of the difference in performance came from the fact that the NEXT FUNDS etf and the eMAXIS fund excluded Japan and included US in their indexes, whereas the Vanguard etf excluded US but included Japan. The fact that the Vanguard was USD hedged, the NEXT FUNDS JPY hedged and the eMAXIS unhedged probably also affected the outcomes in the past year with the yen weakening against both the dollar and the euro.

What are you people on this board using for your international bonds exposure?

I use the eMAXIS Slim one you mentioned.
You might find this interesting: https://www.retirejapan.com/forum/viewt ... 854#p38854

As Interest rates go up, existing bond prices go down.
As Interest rates go down, existing bond prices go up.

If a fund has a Forex Hedge it will (attempt to) lock the exchange rate between the currency the fund is denominated in and the currency of the underlying assets purchased by the fund at the exchange rate on the day of purchase, so that the performance of the hedged fund depends (almost) entirely on the performance of the underlying asset in its native currency, and any performance (up or down) attributable to the exchange rate will be (mostly) eliminated.

If your base currency is Yen, and you believe the Yen will strengthen, then a Hedged Fund would be a good choice.
If your base currency is Yen, and you believe the Yen will weaken, then an Unhedged Fund would be a good choice.

If your base currency is USD, and you believe the Yen will strengthen, then an Unhedged Fund would be a good choice.
If your base currency is USD, and you believe the Yen will weaken, then a Hedged Fund would be a good choice.

If you believe Interest rates will go up, then expect the face value of the bonds you have to go down, as you would have to provide a higher yield to the buyer if you sold.
If you believe Interest rates will go down, then expect the face value of the bonds you have to go up, as you would only need to provide a lower yield to the buyer.if you sold.
Of course, you will receive 100% of the face value of the bond if you hold it to maturity.

ToushiTime wrote: ↑Thu May 16, 2024 6:14 am I use the eMAXIS Slim one you mentioned.
You might find this interesting: https://www.retirejapan.com/forum/viewt ... 854#p38854

This was really interesting. Thank you. I think that I would much rather have less volatility than potential high returns over the long term once I am retired. The eMAXIS Slim one seems to be the one to use, seeing as it is currency hedged.

I suppose one of these days, bonds will finally have a good year.

Relieving the pressure off the bond aficionados, and the "I told you so" bond folks will finally be smiling, a little bit.

captainspoke wrote: ↑Fri May 17, 2024 11:17 am I suppose one of these days, bonds will finally have a good year.

Relieving the pressure off the bond aficionados, and the "I told you so" bond folks will finally be smiling, a little bit.

Having a good year is not the purpose of holding bonds. Reducing volatility before/after retirement is, as that article explained while challenging the new 100%-equities-even-after-retirement thesis that I also linked to.
It is not a question of either stocks or bonds. It is just a matter of how much bonds/gold and when.
I am currently 75% all-world equities, with a global bond fund making up most of the rest, and the remainder is in gold.

ChapInTokyo wrote: ↑Fri May 17, 2024 10:29 am

ToushiTime wrote: ↑Thu May 16, 2024 6:14 am I use the eMAXIS Slim one you mentioned.
You might find this interesting: https://www.retirejapan.com/forum/viewt ... 854#p38854

This was really interesting. Thank you. I think that I would much rather have less volatility than potential high returns over the long term once I am retired. The eMAXIS Slim one seems to be the one to use, seeing as it is currency hedged.

The eMaxis Slim Developed Nation bonds fund is not currency hedged. It says so on the front page of the prospectus.
https://www.am.mufg.jp/pdf/koumokuromi/ ... C42MC4wLjA.
I don't hedge my equity investments for currency fluctuations and see no reason to do so for bonds either.
I don't see the evidence that a globally diversified bond fund is more sensitive to currency changes than a globally diversified equity fund (well the eMaxis Slim bond fund has 0% Japanese holdings and the eMaxis SLIM All Country equity fund has about 5% or so Japanese holdings, so there is that).
The people on the forum who actually crunched the numbers did not show a clear difference and did not claim that.
I am also skeptical that the yen will strengthen significantly over the long term, considering the outlook for the Japanese economy.

Hi. You're right. The eMAXIS Slim Developed Market Bond Index Fund is not currency hedged. I think that the idea about hedging bond funds is that the bonds allocation is supposed to stand fast when the stock prices plummet so that you'll have some capital to put into buying the now-cheap stocks in anticipation of a rally. In that scenario, having the bond part currency hedged will at least take the currency rate risk out of the risks your portfolio faces.

I recenly posted about the Rakuten Balanced Index Fund in another thread as something I might consider for my NISA account. That fund is composed of 70% VT and 30% yen-hedged BNDW. Since the fund will rebalance itself when stocks plummet or surge as the case may be, it obviously won't have as much upside as a 100% stocks portfolio but when stocks plummet it will go down less and will have some money on the bonds side protected by the currency hedging with which to buy the stocks which are now at bargain basement prices. That's the idea anyway. What do you think of that fund?

ChapInTokyo wrote: ↑Mon May 20, 2024 5:44 am Hi. You're right. The eMAXIS Slim Developed Market Bond Index Fund is not currency hedged. I think that the idea about hedging bond funds is that the bonds allocation is supposed to stand fast when the stock prices plummet so that you'll have some capital to put into buying the now-cheap stocks in anticipation of a rally. In that scenario, having the bond part currency hedged will at least take the currency rate risk out of the risks your portfolio faces.

I recenly posted about the Rakuten Balanced Index Fund in another thread as something I might consider for my NISA account. That fund is composed of 70% VT and 30% yen-hedged BNDW. Since the fund will rebalance itself when stocks plummet or surge as the case may be, it obviously won't have as much upside as a 100% stocks portfolio but when stocks plummet it will go down less and will have some money on the bonds side protected by the currency hedging with which to buy the stocks which are now at bargain basement prices. That's the idea anyway. What do you think of that fund?

Probably not for me thanks.
70% of that Rakuten fund wraps a Vanguard global ETF inside it so you will get triple taxation on that. I am not sure about the other 30%.
https://retirewiki.jp/wiki/Japanese_glo ... on_problem
I prefer just to keep dollar averaging through tsumitate and rebalance manually using the funds I mentioned (with no currency hedge, as I see that as an unnecessary cost over the long term).