Best International Bond ETFs for 2024: Top Picks for Global Debt Exposure

As global economic dynamics shift in 2024, international bond Exchange-Traded Funds (ETFs) are becoming an attractive option for investors seeking to diversify their portfolios. With interest rates fluctuating and global financial conditions constantly evolving, bond ETFs offer a diversified, low-cost way to gain exposure to international debt markets.

This article provides a detailed guide on the best international bond ETFs for 2024, considering performance metrics such as short-term returns, long-term gains, and market stability. We will focus on various types of bond ETFs including corporate bonds, government bonds, convertible bonds, and emerging market bonds.

Why Invest in International Bond ETFs?

Investing in international bond ETFs offers a range of advantages:

Diversification: Spreading investment across different countries and regions mitigates risk.

Hedging Currency Risk: Many international bond ETFs come with currency hedging options, protecting investors from adverse currency movements.

Exposure to Emerging Markets: These ETFs provide access to the rapidly growing debt markets in developing countries.

Yield Potential: Many international bonds offer higher yields compared to domestic bonds, especially in high-growth regions or those with higher interest rates.

Key Considerations for 2024

For 2024, investors should look for bond ETFs with strong historical performance, high yield potential, and currency-hedging options. Additionally, factors such as ESG (Environmental, Social, Governance) criteria and the impact of global interest rate policies should be considered.

Best International Bond ETFs for 2024

1. iBoxx® Contingent Convertible Liquid Developed Europe AT1

4 Week Performance: +9.39%

1 Month Return: +1.55%

3 Month Return: +2.88%

1 Year Return: +15.23%

3 Year Return: +3.67%

Number of ETFs: 1

This ETF tracks the performance of Contingent Convertible Bonds (CoCos) issued by developed European financial institutions. These bonds are unique as they automatically convert to equity if the issuing bank’s capital falls below a certain threshold, offering higher yields to compensate for their risk.

Performance Overview: The ETF has performed strongly over the past year, gaining 15.23%, with its 4-week performance showing a gain of 9.39%. Its exposure to European banks has benefited from rising interest rates and a stable banking sector, although the CoCo bond structure adds a layer of risk for conservative investors.

Outlook for 2024: With the ongoing economic recovery in Europe, this ETF stands to gain further, particularly if European financial institutions maintain strong capital positions.

2. ICE BofAML Diversified High Yield US Emerging Markets Corporate Plus

4 Week Performance: +9.32%

1 Month Return: +0.59%

3 Month Return: +0.15%

1 Year Return: +10.37%

3 Year Return: +5.92%

Number of ETFs: 1

This ETF provides exposure to high-yield corporate bonds from emerging markets, with a focus on U.S. dollar-denominated bonds. It offers a diversified approach to corporate debt in regions like Latin America, Asia, and Eastern Europe.

Performance Overview: The ETF has had a solid 12-month return of 10.37%, benefiting from the improving credit quality of emerging market corporates. Its recent 4-week return of 9.32% reflects the market’s positive sentiment towards emerging market debt as inflation eases and growth prospects improve.

Outlook for 2024: The outlook for this ETF remains strong, particularly if the global economy stabilizes and risk appetite improves. The higher yields from emerging market corporate bonds make this a strong contender for income-focused investors.

3. Bloomberg Euro Universal Corporate ex Financials Hybrid Capital Securities 8% Capped Bond

4 Week Performance: +9.18%

1 Month Return: +1.76%

3 Month Return: +4.71%

1 Year Return: +15.00%

3 Year Return: -0.08%

Number of ETFs: 2

This ETF focuses on non-financial corporate bonds in the eurozone, with a cap on hybrid capital securities at 8%. Hybrid bonds are a mix between debt and equity, offering higher yields but also carrying more risk.

Performance Overview: The ETF’s 15% return over the past year demonstrates the strength of the eurozone’s corporate bond market, driven by resilient earnings and low default rates. Its short-term performance remains impressive, with a 4-week return of 9.18%.

Outlook for 2024: Corporate earnings in Europe are expected to remain stable, which should support continued performance in this ETF. However, investors should be mindful of interest rate changes in the eurozone, as these could impact bond prices.

4. iBoxx® USD Contingent Convertible Liquid Developed Market AT1 (EUR Hedged)

4 Week Performance: +9.15%

1 Month Return: +2.17%

3 Month Return: +5.38%

1 Year Return: +15.66%

3 Year Return: -5.61%

Number of ETFs: 1

This ETF focuses on Contingent Convertible Bonds (CoCos) issued by developed markets, with a hedging option for euro-based investors. It provides exposure to high-yield bonds with currency risk mitigated by the hedging mechanism.

Performance Overview: The ETF has shown robust returns over the past year, with a 12-month return of 15.66%. Its 4-week return of 9.15% underscores the strong performance of CoCo bonds in developed markets.

Outlook for 2024: The hedging option makes this ETF attractive for euro-based investors looking to gain exposure to the U.S. dollar without taking on currency risk. CoCo bonds remain a high-risk, high-reward option, and performance will depend on the stability of issuing financial institutions.

5. iBoxx® MSCI ESG USD Asia ex-Japan High Yield Capped (EUR Hedged)

4 Week Performance: +8.55%

1 Month Return: -0.68%

3 Month Return: -3.47%

1 Year Return: +10.70%

Number of ETFs: 1

This ETF targets high-yield corporate bonds in Asia, excluding Japan, with a focus on ESG-compliant companies. The ETF is hedged to the euro, making it suitable for European investors seeking exposure to Asia’s high-yield market while managing currency risk.

Performance Overview: Despite a weak 3-month performance (-3.47%), the ETF has performed well over the past year, gaining 10.70%. Its recent 4-week performance of +8.55% indicates a recovery in the Asian high-yield market.

Outlook for 2024: As Asia’s economic growth picks up pace, particularly in regions like Southeast Asia and China, this ETF could see further gains. The ESG focus also aligns with increasing demand for socially responsible investing.

6. Bloomberg SASB US Corporate High Yield ESG Ex-Controversies Select

4 Week Performance: +8.34%

1 Month Return: +1.64%

3 Month Return: +1.82%

1 Year Return: +11.35%

3 Year Return: +16.42%

Number of ETFs: 1

This ETF provides exposure to U.S. high-yield corporate bonds that comply with ESG criteria, excluding controversial sectors. It focuses on companies that meet stringent environmental, social, and governance standards.

Performance Overview: The ETF has delivered strong returns over the past three years (+16.42%) and has gained 11.35% over the past year. Its 4-week performance of +8.34% reflects positive sentiment in the U.S. corporate bond market.

Outlook for 2024: As ESG investing continues to grow, this ETF offers a strong opportunity for investors looking to balance high yields with socially responsible investing. The U.S. corporate bond market is expected to remain resilient in 2024, supporting continued performance.

7. Bloomberg Emerging Markets USD Sovereign & Agency 3% Country Capped

4 Week Performance: +8.30%

1 Month Return: +1.72%

3 Month Return: +1.94%

1 Year Return: +12.56%

3 Year Return: +0.74%

Number of ETFs: 1

This ETF tracks sovereign and agency bonds from emerging markets, with a cap on country exposure at 3%, reducing concentration risk. It provides diversified exposure to government bonds in regions like Latin America, Asia, and Africa.

Performance Overview: The ETF has gained 12.56% over the past year, with a 4-week return of +8.30%. Its diversified approach has helped mitigate risk, providing stable returns across multiple regions.

Outlook for 2024: Emerging market government bonds are likely to continue performing well, particularly as inflation pressures ease and economic growth picks up in developing regions. The country cap helps limit exposure to any single country’s risk.

8. FTSE Emerging Markets USD Government and Government-Related Bond Select

4 Week Performance: +8.15%

1 Month Return: +2.24%

3 Month Return: +2.63%

1 Year Return: +12.99%

3 Year Return: +0.83%

Number of ETFs: 2

This ETF focuses on U.S. dollar-denominated government and government-related bonds from emerging markets. It provides a diversified approach to sovereign debt in developing countries.

Performance Overview: With a 12.99% gain over the past year, this ETF has outperformed many of its peers. Its 4-week return of +8.15% demonstrates strong momentum in emerging market debt.

Outlook for 2024: The continued recovery of emerging markets should support further gains for this ETF. As these economies stabilize, sovereign bonds are expected to perform well, offering both yield and growth potential.

Best International Bond ETFs for 2024

The best international bond ETFs for 2024 offer diverse exposure to global debt markets, from emerging markets to developed economies. Investors looking for yield, diversification, and ESG compliance will find a variety of options to match their risk profiles and investment goals. While high-yield and convertible bonds offer higher returns, they come with increased risk. Meanwhile, government bonds provide a more stable but lower-yielding alternative.

Ultimately, the best international bond ETF for you will depend on your risk tolerance, investment horizon, and the specific regions or sectors you’re looking to invest in. As 2024 unfolds, monitoring global economic trends, interest rates, and corporate earnings will be key to maximizing returns in the international bond market.