China’s gross domestic product (GDP) took a hit during the third quarter, and fixed income investors who don’t want exposure to the country’s debt during this tenuous time can opt for specific ETFs.

“China’s economic growth is sinking under pressure from a construction slowdown and power shortages, prompting warnings about a possible shock to its trading partners and global financial markets,” a NPR article reported. “The world’s second-largest economy grew by a weaker-than-expected 4.9% over a year ago in the three months ending in September, down from the previous quarter’s 7.9%, government data showed Monday. Factory output, retail sales and investment in construction and other fixed assets all weakened.”

ETFs from Vanguard can offer investors international diversification while also obtaining the extra yield that other countries’ debt can offer. At the same time, these funds avoid Chinese debt exposure while the country stands on shaky ground.

One option to consider is the Vanguard Total World Bond ETF (BNDW). BNDW seeks to track the performance of the Bloomberg Global Aggregate Float Adjusted Composite Index, which measures the investment return of investment-grade U.S. bonds and investment-grade non-U.S. dollar-denominated bonds.

BNDW is ideal for investors who want exposure to debt markets outside the U.S. but do not want to completely disregard fixed income in the United States. In essence, the ETF provides more of a global aggregate bond fund.

BNDW offers:

  • Exposure to the Bloomberg Global Aggregate Float Adjusted Composite Index.
  • Broad, diversified exposure to the global investment-grade bond market.
  • Unique ETF of ETFs structure.
  • Intermediate-duration portfolio, with exposure to short-, intermediate-, and long-term maturities.
  • Current income with high credit quality.

A Pure International Play

For an additional play on the debt markets overseas, there’s the Vanguard Total International Bond Index Fund ETF Shares (BNDX). BNDX employs an indexing investment approach designed to track the performance of the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index, which provides a broad-based measure of the global, investment-grade, fixed-rate debt markets.

Highlights of BNDX:

  • Attempts to track the performance of the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged).
  • Employs hedging strategies to protect against uncertainty in exchange rates.
  • Provides a convenient way to get broad exposure to non-U.S. dollar denominated investment-grade bonds.
  • Is passively managed, using index sampling.

For more news, information, and strategy, visit the Fixed Income Channel.