Not only are stocks of companies with medium or medium to high trading volume, but also government bonds issued by the Treasury Department in Washington or by European debtors who turn directly to the American market, in order to diversify the currencies in which they borrow. First, mediating currency risks and saving financing costs if possible. Even those who invest their savings can choose to diversify not only the type of issues to which they allocate part of the funds available in the current account, but also the currency, different from the euro, to which they entrust part of the available funds. The state broadcaster’s reliability score across the Atlantic is at the highest levels, even if two ratings agencies downgraded it from Triple A to Double A plus.. In practice, reliability has decreased slightly. The government issues in the table offer particularly interesting total returns for shorter maturities, even if it is worth noting that the yield for those issues with a slightly longer duration is slightly lower. We are between 5.29% and 5.54% for bonds expiring in May 2024. On the other hand, the profitability offered by the two US banks in the table is interesting: Goldman Sachs 2025 offers 6.39% and JP Morgan for five years. Duration of the year is 5.81%.
Exchange risk
Buying listed securities is very simple, as many financial instruments are also listed on the Italian Stock Exchange. In any case, including this type of bond instrument in a portfolio is always simple and quick. In general, a saver who resorts to issues in currencies other than the euro has a moderate degree of risk appetite. By choosing types of bond instruments denominated in dollars, but the logic applies to any currency other than ours, you expose yourself to exchange rate risk.. In practice, the value of different currencies, not only the euro or the US dollar, but also the British pound, the Japanese yen, Nordic currencies, the Swedish or Norwegian krone and others, can vary day to day, just as it happens. For the value of stocks and, why not, bonds, including government bonds. Fluctuations in exchange rates are generally relatively contained, but nothing excludes the possibility of significant fluctuations, in the face of situations not only of an economic, but often of a political nature.
How to deal with currency bonds
Referring to the relationship between the US dollar and the single currency, it is interesting to take into account that since the beginning of the year, the largest increase for the euro against the US dollar was 5.34%, 1.1224 versus 1.0655, on July 19. While the largest decline was recorded at 1.74 percent, 1.0470, compared to 1.0655 on October 3. The maximum percentage change exceeded 7%, and stabilized at 7.08%. This is a move that is quite in line with what is happening in the stocks and bonds sectors. Although in reality, the two differences, taken individually, do not seem to be excessive. At the same time, the above-mentioned changes in the exchange ratio do nothing but affect the profitability of the investment, both in a positive and negative sense. By excluding from this type of strategy those with low or very low risk appetite, the share allocated to this sector of the bond market can range from 10% to 30% of assets invested in the bond market. With the recommendation, if one chooses to allocate an amount to instruments denominated in currencies other than the Euro, to follow volatility. So that we are not surprised by any significant changes in the value of the two currencies, especially if they are negative.
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