The 10-year rate on a 10 Year US Bond for November 18, 2020, is 0.86%. If the bond is a 10 year US government bond with a face value of $ 10,000, the bond yield will be $ 86 ( 0.86% x $ 10,000)/100%.
Europe, Middle East & Africa bonds are other sets of bonds listed by Bloomberg. The United Kingdom 10-Year Government Bond yield is also selected for analysis. The United Kingdom's 10-year government bond yield is 0.32 ( Bloomberg, 2020) . An investor will pay less for the United Kingdom 10 year government bond in US dollars than the United States 10 year government bonds. With a currency exchange rate of 1 EUR to USD = 1.16509 US Dollars, an investor will pay 8412.91 euros for the United Kingdom 10 year government bond ( Bloomberg, 2020) . With a yield rate of 0.32%, the investor earnings will be as follows:
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Yield = (face value of bond x rate)/ 100%
Yield = (8412.91 x 0.32%) /100%
Yield = 26.921312 euros
In US dollar = 26.921312 x 1.16509
Yield = $ 31.365751
According to the calculations above, the United Kingdom 10-year bond is cheaper than that of the US 10-year government bond. For example, an investor will spend $ 54.63425 ($86 - $ 31.365751 ) more to invest in a 10-year US government bond with a face value of $ 10,000 than investing in a foreign UK government bond. The UK 10-year government bond is more stable than other foreign countries’ 10-year government bonds ( Bloomberg, 2020) . Therefore, it was the best foreign government bonds to consider in this analysis. Based on the calculations and analysis above, investors should invest in a UK 10-year government bond because they will spend less for a bond of $ 10,000 face value.
References
Bloomberg. (2020, November 18). Bloomberg . https://www.bloomberg.com/markets/rates-bonds
