Should I invest in my Previous country's higher yield bonds stead of US Bonds

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
haranoth
Posts: 61
Joined: Wed Apr 06, 2016 12:07 pm

Should I invest in my Previous country's higher yield bonds stead of US Bonds

Post by haranoth » Wed Jun 12, 2019 2:16 pm

I am a citizen of Bangladesh and also a green card holder here at US. I am planning on applying for dual citizen status.
Bangladesh allows for an expatriate to invest in a govt. backed bond
which allows for 6.5% return rate bond (tax free both on the yield/dividend and principal amount).
You will get that rate , if you invest a minimum of 3 years.
The money is transferable back to US.
A one pager info on the product can be found in https://www.sonalibank.com.bd/bond.php
"US Dollar Investment Bond"
All the other literature is in Bengali, so I didnt add it here.

I am wondering whether I should invest some part of my bond allocation to this ex-US/south east asian country govt. backed issue.
Wondering whether other expatriates from other countries have faced the same issue.
* What are the pros and cons, you faced?
* Can you guys give some concrete example e.g. how this approach fares against just buying US intermediate term bond. e.g. VBIIX

The cons I can think are:
1. It's a massive hassle to buy the bonds. There is no automated digital process. You need paper copy, signatures etc.
2. The rating seems to stand at BB-, according to tradingeconomics https://tradingeconomics.com/bangladesh/rating, and the country is stableish...

The pros I can think of are:
1. Pretty high yield for a bond, 6.5%
2. It isn't taxable in Bangladesh. I am not sure however, whether this will become taxable if I bring the money back to US. I haven't been able to find literature.
Last edited by haranoth on Wed Jun 12, 2019 3:43 pm, edited 2 times in total.

magicrat
Posts: 684
Joined: Sat Nov 29, 2014 7:04 pm

Re: Should I invest in my Previous country's higher yield bonds stead of US Bonds

Post by magicrat » Wed Jun 12, 2019 2:49 pm

A quick Google search tells me the forecast inflation rate in Bangladesh is ~5.5%. A 1% real return doesn't seem worth the hassle or risk to me. You also need to consider currency risk.

Topic Author
haranoth
Posts: 61
Joined: Wed Apr 06, 2016 12:07 pm

Re: Should I invest in my Previous country's higher yield bonds stead of US Bonds

Post by haranoth » Wed Jun 12, 2019 3:46 pm

Yikes.. The inflation part didnt occur to me at first.
However, from the product page “US Dollar Premium Bond”, it seems the 6.5% yield is going to be provided in Dollars as well. So the inflation that I should be worried about is the inflation of USD or rather US and not of Bangladesh?.
Regarding currency risk.. It seems Bangladesh Govt. takes a hard approach to keep the overall USD to Bangladesh taka currency conversion stable for the last 3 years.
https://www.xe.com/currencycharts/?from ... DT&view=5Y

However, since both the principal and dividend/yield amount is going to be provided/take out in USD, do I really need to worry about currency risk.

Seems, like both inflation and currency risk is tagged to USD. So they might be moot in this case ?. Thanks for bringing up some valid points.

Assuming the 6.5% yield is provided in USD tax free and can be transferred back to US , would you consider this as a good investment?

Broken Man 1999
Posts: 2509
Joined: Wed Apr 08, 2015 11:31 am

Re: Should I invest in my Previous country's higher yield bonds stead of US Bonds

Post by Broken Man 1999 » Wed Jun 12, 2019 4:46 pm

High reward with high risk, IMHO.

OP, what percentage of your bond allotment are you considering for these Bangladesh bonds? If I were one to buy US corporate high-yield bonds in the US, and I am not, I certainly wouldn't buy a substantial amount. A small allocation might turn out OK.

Not for me, might be for thee.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Topic Author
haranoth
Posts: 61
Joined: Wed Apr 06, 2016 12:07 pm

Re: Should I invest in my Previous country's higher yield bonds stead of US Bonds

Post by haranoth » Wed Jun 12, 2019 6:47 pm

My portfolio allocation is pretty stock heavy. Only about 10% is in US bonds and about 1% on international bonds (all through vanguard offcourse).

So, my thoughts were to dig deep, get some ideas and perhaps change my allocation/ future contributions to match following:

6% on Bangladesh Govt. Backed bonds
8% on US bonds
1% on international bonds
60% on US stocks
20% on international stocks
5% on REIT

Post Reply