In the first month of 2026, US investors have seen notable gains by diversifying into foreign bond markets. Exchange-traded funds (ETFs) tracking these markets reveal that foreign bonds have generally outperformed their US counterparts through January 29.
The standout performer is inflation-indexed government bonds outside the United States. The SPDR FTSE International Government Inflation-Protected Bond ETF (WIP) has risen 4.5% year-to-date, surpassing other foreign fixed-income segments as well as the US inflation-protected bond ETF.
All foreign bond ETFs analyzed have outpaced the US investment-grade fixed-income benchmark, the Vanguard Total Bond Market ETF (BND), which has recorded a modest 0.3% gain so far this year.
A weakening US dollar has contributed to the strong performance of foreign assets, including bonds. WIP’s 4.5% increase coincides with a 1.6% decline in an ETF tracking the US dollar in 2026.
Concerns about rising government debt levels are also supporting demand for inflation-protected foreign bonds. Several major economies, including six of the seven G7 nations, have government debt equal to or exceeding their economic output, according to the International Monetary Fund. This elevated debt burden leads to higher interest payments, which can further increase inflationary pressures.
In response to fiscal uncertainties, investors are increasingly allocating to inflation-hedged securities. This shift is also reflected in the strong performance of gold, with the SPDR Gold Shares ETF (GLD) rising 25% so far this year, as investors seek assets less vulnerable to fiscal risks and currency fluctuations.
Economic analysts have highlighted government debt as a growing concern. Neil Shearing, chief economist at Capital Economics, described the situation as a warning sign of underlying vulnerabilities in advanced economies.
