Why Foreign Bonds Are Winning in 2025

In 2025, foreign bonds are stealing the spotlight. They are doing better than US bonds. This is not just a small win. It is a big deal. Emerging market bonds are up by 17. 5% this year. That is more than double the gain of the US benchmark bond. Even the weakest group of foreign bonds is doing better than the US. These are government bonds from developed countries outside the US. They are still ahead of the US benchmark. So, why is this happening? One big reason is the weak US dollar. It has dropped by more than 9% this year. This makes foreign bonds more attractive to US investors. The Federal Reserve has been cutting interest rates. This makes US bonds less appealing. Foreign bonds offer higher yields. So, investors are moving their money overseas.There are other reasons too. The US has big budget deficits and a lot of debt. This makes investors nervous. They are looking for safer options. Foreign bonds offer diversification. Politics is also playing a role. There is pressure on the Federal Reserve. This raises questions about their independence. Investors are worried about inflation and the Fed's ability to control it. Trade uncertainty is another factor. US tariffs are making trade less attractive. This reduces demand for the US dollar. A weaker dollar means foreign bonds are more valuable. Central banks around the world have their own agendas. But one thing is clear. The US dollar is weak. And that is good news for foreign bonds.