She has no financial clue (or risk appetite, for that matter) - but I can’t really help with bonds, this was never my playground. I’m naively thinking the current 5% US10Y yield could be bought somewhere as a security…
This is great, thanks. Will need to see if you need a US address/bank account for this.
In that case, you’d better consider shorter durations until the Fed seems to manage to tame inflation…
I would either learn about what I’m planning to invest in, or stay away from securities (including bonds). Nominal bonds do loose value when interest rates rise and that will probably be displayed on her account even though you get the face value paid back when they reach maturity.
Forex fluctutations are another aspect that could hit her unexpectedly if she spends her money in another currency than USD.
If you buy the actual treasury (and not ETFs) and keep it up to the maturity date, there is virtually no risk in a bond. You get interest as stated and your capital back at the end of the term.
I haven’t had the time or courage yet to buy any US treasuries myself, but given the current yields, they still seem pretty attractive to me compared to Swiss treasuries.
Of course, there’s always inflation to consider with bonds, but Swiss inflation is a lot lower than US inflation, while the USD has maintained its strength vis-a-vis the CHF.
Surely I wouldn’t go for intermediate to long-term treasuries due to currency risk, but some short-term treasuries, why not?
Or, if US-inflation is a concern to you because you have lots of US liabilities, why not buy IBonds (if US citizen) or TIPS?
Overall though, I have become increasingly sceptical of the use of bonds for me. I don’t really like the fact that the government can deliberately choose to inflate away their debt, print money, devalue their currency, or rise rates whenever they see fit.
Care to explain why that would be relevant, esp. foreign inflation.
FX risk (and expected interest rate parity) seem relevant, but I don’t really see why inflation matters here.
Or you think central banks will raise rate further to tame it (but then not sure why it hurts).
Inflation, if taken into account should be substracted equally from all asset class (equity, real estate, etc.). And in general foreign inflation doesn’t impact a swiss investor (except as much as it impact the overall economy, an hyperinflation cycle in the us would be fairly damaging, probably impacting all asset classes tho)
Yes, totally agree, I’ve tried to make that point above, guess I haven’t expressed myself too clearly 
From a purely legal/fiscal perspective, are there any problems for a Swiss citizen and resident to buy foreign bonds? You don’t need to be a US citizen in order to buy US bonds, do you?
As far as I know: No. I assume you’re referring to individual treasuries. You can go to https://www.treasurydirect.gov/ and get yourself some Christmas presents 
You can´t buy them directly in TreasuryDirect if you are not US resident but you can buy them with your broker. As a tip, you can download all the auctions and take the CUSIP to facilitate the search in IBKR or the broker that you use to buy them.
Maybe a little off-topic: Would you rather buy Swiss government bonds or CHF-hedged US treasuries?
Or does it matter at all?
Long term should be equivalent, but higher taxes on the US ones (since it has higher yield).
Good point, haven’t considered tax implications! Worried about the National Bank further raising rates though…
Also, if you have a somewhat international lifestyle living abroad for longer periods of time, does it make sense to only hold bonds in CHF? Wouldn’t a CHF/USD or EUR mix be preferable?
Nah. If you want a more or less determined yield in CHF, you would have to FX hedge at least the principal of the US bond up to the maturity date. It won’t work with bond funds, they typically hedge for one month, maybe 3, but certainly not more.
However, I wonder if someone wants to check the CHF yield (before and after taxes) on the following combination:
- Buy a US Treasury bond with the maturity in, say, 3 years. At IB, so fees are low.
- Buy a USDCHF FX swap on the amount of the bond’s principle until the maturity.
I don’t know practical details of using FX swaps and I am not very interested, so I won’t do this myself.
Another aspect to consider is: which government are you willing to finance?
Maybe I’m totally confused, but the tax declaration changes USD interest to CHF at the end of year, so could you theoretically win twice here 
?
Global investment grade corporate and potentially government bonds (with low government exposure to the US and EM) hedged in CHF or Swiss government bonds.
I trust democratic governments to protect their citizens as investors in case of default because the opposite wouldn’t get them reelected. I don’t trust them to offer the same level of protection to foreign investors. The US Government is one of those I trust the least: the IRS is predatory (they’re one of the few countries who tax their citizens when they live abroad, for example) and their current breed of politicians are very anchored in their partisan views, to the point of making defaulting on their bonds a talking point.
A huge diversification through issuers gives me a better sense of security than a concentration in a single foreign government. The risk I am trying to mitigate, here, being a risk of default (I doubt all corporations would default all at once). The bonds may all loose value at the same time and the duration of the bond fund should match the time horizon of the investment (if not available, I would choose shorter and expose myself to interest risk rather than longer and risk loosing capital to market fluctuations).
Here are a couple of interesting reads with this regards (ST vs LT Bonds)
On one hand, short term bonds don’t have duration risk.
On the other, they only lock yield for so long and don’t protect in a deflation scenario.
US interest tax is 0% according to the document “Double taxation agreements: overview” on the Double taxation agreements page on admin.ch. There is a caveat though:
BND probably holds some products like that. Which leads to a non-zero withholding tax.
What is also interesting is that holding long-term treasuries in IDLT (IE00BSKRJZ44) doesn’t expend any taxes according to the annual reports. In fact none of the bond funds (including Eurozone bonds) in that report do, whilst equity funds do.
At least for the US bonds I found some probable explanation: Portfolio Debt(/Interest) Exemption as explained by those IRS slides makes 0% US tax possible for any foreign lender under certain circumstances.