How to Buy International Government Bonds

The financial sector continues to grow at a fast pace. Not long ago investors were mainly limited to trading in domestic financial instruments. This has changed as most investors are now able to trade across the globe. The same has also happened to the bond market. Whereas trade was limited to domestic bonds one can now buy on the international markets. The website defines a bond as a debt security. When you purchase a bond, you are lending money to an institution known as an issuer. In return for money the issuer, provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repay the face value of bond known as the principal when it matures.

The reason why most investors opt to invest in international government bonds is because of the attractive yields that many get. This high yields can be spurred by the lowering of the domestic currency or a downturn in the economy. This makes investments in international bonds attractive and also offers a chance to diversify the portfolios to hedge against losses. So buying an International Government backed bond can be a good option. The greatest advantage of this type of bond is that it is backed by the Governments hence reducing the chances of the issuer defaulting. So before you buy an international Government bond one should be aware of the various risks associated with this investment.

One should be aware that the rate of return of the investment will be likely affected by the currency changes. If the domestic currency gains on the international market it means that the yield is cut .The opposite is also true if the domestic currency slides it entails more yield to the investor. It is also critical to examine the country profile of where you would want to invest your money. This first step is essential because it gives one the chance of choosing a good country to invest in. One will have to make a decision on how much money is to be invested. In many countries one would need a lot of money to buy the bonds especially if one would want to buy the bonds directly from the Government. Now that the money is ready one would have to decide how the best way to purchase the international bond. The easiest and least expensive way for small investors to buy an international Government bond is through a mutual fund. Most of the mutual funds are invested primarily in the developed markets of the world. The quality and durations of the bond vary from one fund to the other. The big advantage that one can enjoy by buying into the mutual fund is the simple reason that you get a lot of diversification across several bonds and countries hence lowering your investment risk. However if one is not happy about investing into a mutual fund one can purchase individual foreign government bonds from big investment firms. This can be done if one can approach a broker for the purchase of the international bond. One has to be careful to find a good broker because they are a lot of investment firms that offer a lot of products. It would make good sense to deal with a broker who has extensive experience and specializes in the global investment markets. After one has made the final decision, one can then open an account with the investment broker. If one is to use this method then there has to be payment of management fees to the brokers for the assistance in the purchase. If one does not want to use a broker then it is possible to buy the international Government bonds directly. The process is complicated for a number of reasons. One has to carry out extensive research in order to invest the money wisely, most countries have restrictions on non citizens buying Government bonds and one would require a lot of capital to invest. Despite this some countries like Singapore open up to international buying of bonds as explained by the website .In Singapore they are two markets which consists of the Primary which caters for the big investors mainly for the big international banks like Citi Bank, HSBC and the Bank of America. There is also a secondary market which is over the counter transactions. One would need to invest a lot of money because the domination of the bond market that is used is S$ 1000.It is now getting easier to purchase the international Government bonds. This can now even be done in the comfort of ones home as there are websites that can be used. is a typical website in Singapore that sells International Government bonds to the outside world.

The way one invests in International Government bonds depends on what goal one wishes to fulfil both in the short term and in the long run. International Government bonds though have really done well in the market despite the risks that have been cited. It is therefore expected that the market will continue to grow and give investors another channel for financial investment.