With the potential that interest rates will rise substantially in the next few years, bonds and bond funds could lose a lot of value. Shorter term bonds can reduce interest rate risk, but their yields are low. One way to invest in bonds that can avoid some of this risk is foreign government bond funds. This AP article via Boston Globe
has an interview with the lead manager of the Templeton Global Bond Fund. This excerpt shows some of the benefits:
But you get stronger return opportunities when you internationalize a portfolio. If you buy bonds in South Korea or Australia, for example, you can get a higher yield than in the US without having to take more interest rate risk by holding bonds that mature over longer time periods.