Income in Dollars, Please

Friday, April 17th, 2020   Categories: Corporate Bonds, Dividends, Energy Prices, Eurozone Crisis, FX rates, Government Bonds, Tail Risk

Time to look at European Energy equities

Generating an adequate income from euro-denominated bonds is next to impossible, so investors should abandon the attempt. They should embrace currency risk – not try to hedge it away. They should enjoy the fact that US dollar yields are structurally higher than those in the Eurozone. This means owning long-dated Treasuries and dollar-denominated EM sovereign bonds. Finally, they should consider the source currency of their equity dividends and take another look at the Energy sector.