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Overcoming low and negative yields: How currency hedging can turn a negative into a positive

October 2019

Depending on an investor’s domestic market, currency hedging could be used as a tool to not only help reduce volatility, but also potentially take advantage of yield differentials.


Major sovereign bond markets outside the US are awash with low—and in some cases negative—yielding bonds. Many global central banks, primarily those in Europe and Japan, still maintain dovish policy rate stances. Despite this, fixed income continues to play a vital role in asset allocation, with investors valuing the role bonds play in income, liability matching, and diversification.

Jitu Naidu
Client Portfolio Manager

Important Risks: Investing involves risk, including the possible loss of principal. ● Foreign investments may be more volatile and less liquid than U.S. investments and are subject to the risk of currency fluctuations and adverse political and economic developments. These risks may be greater for investments in emerging markets. ● Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. 

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