US fixed income can be a valuable source of diversification for European investors, but in the past the cost of hedging of the US Dollar exposure was high, neutralizing this benefit. The situation has changed, and the cost of hedging for Euro-based investors is much lower than in the recent past. Furthermore, we expect this cost will remain low.

As a result, we believe the US market can potentially be a compelling investment opportunity for Euro-based investors to complement their domestic fixed income allocation with US bonds.