James Picerno: Global Bond Diversification Outperforms US Bonds Despite Strong Dollar
James Picerno analyzes 2026 year-to-date ETF returns showing emerging-market high-yield, foreign inflation-linked, and local-currency sovereign bonds outperforming their US counterparts. He notes this occurs despite a 4% rise in the US Dollar Index, attributing the result to higher non-US yield premiums and concerns about US fiscal deficits.
ImportanceMaterialEvidenceE3 inspectableWrite-upQuick
In a recent analysis, James Picerno examines the performance of global versus US bond markets in 2026, highlighting how international fixed income has helped ease the pain of a rough year for US bonds. Reviewing a set of ETFs through Tuesday’s close, he notes that the Vanguard Total Bond Market ETF (BND), representing the US investment-grade benchmark, has lost more than 2% year to date due to sharp rises in Treasury yields. If this decline holds through December 31, BND will post its first calendar-year loss since the 2022 bond rout.
Picerno contrasts this with certain segments of the non-US bond market that have provided a way to temper losses. Emerging-market high-yield bonds (HYEM) lead the pack with a 2.8% total return so far this year. Foreign inflation-linked government bonds (WIP) have gained 1.9%, well ahead of the 1.6% year-to-date loss for their US counterpart, represented by TIP. Similarly, EMLC, which tracks local-currency sovereign debt in emerging markets, is up 1.2%, marking a moderate performance advantage over the 2.2% loss for a roughly comparable portfolio of US Treasuries (IEI). The corporate bond market tells a similar story, with the WisdomTree Emerging Markets Corporate Bond ETF (EMCB) posting a modest 0.3% gain versus a 1.2% loss for a roughly comparable US corporate bond portfolio (SKOR).