5. International and Emerging-Market Bonds: International bonds, including emerging-market debt, are issued by non-U.S. governments and corporations. As with U.S. bonds, investors in international bonds have to rely on issuers to have the financial strength to meet their periodic interest payments and repay the principal at maturity. International bonds carry many of the same risks as U.S. bonds, including interest rate risk, inflation risk and default risk. In addition, investors have to contend with another important risk: currency risk. If, for example, foreign currencies fall in value against the dollar, your interest payments will be worth less when converted into dollars. Conversely, if foreign currencies strengthen, your payments could increase. International bonds can also be buffeted by political, economic and social turmoil in the issuing country.
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