The Quest For Yield: A Perspective On New Zealand Dollar ETFs

Searching for yield overseas, but can’t stomach the idea of historically low and negative real (inflation-adjusted) interest rates in most developed (G10) economies, such as U.K. or German 5-year government bonds at 1.06% or 0.94%? Or, perhaps you’re not yet comfortable with the liquidity aspects of higher-yielding emerging market local currency debt with stronger fiscal accounts and favorable debt metrics? As an alternative to these options, New Zealand offers enticing yields and numerous investment opportunities for the personal and professional investor. For example, New Zealand 5-year government bonds and 3-month T-bills yield 3.62% and 2.70%, while a bank savings account at a top-tier bank pays as much as 4%. Comparatively, here in the U.S., equivalent U.S. Treasuries pay 0.88% and 0.005%, while a Bank of America savings account pays a paltry 0.35%. Given New Zealand’s relatively alluring yields, is an investment down under worth the risk? Let’s examine the kiwi... Read more