Long-maturity bond yields rose meaningfully during the second quarter amid elevated volatility as the market repriced the impact of quantitative easing and the long-term value of government bonds in most developed markets. German sovereign debt experienced some of the most pronounced price declines after the 10-year German government note's yield reached an all-time low of 0.05% in April. The lack of progress in negotiations between Greece and its creditors caused a modest increase in yields on peripheral eurozone government debt. The U.S. dollar's recent strength against most other currencies moderated during the second quarter, although the Japanese yen continued to decline against the dollar.
The International Bond Fund returned −0.90% in the quarter compared with −0.83% for the Barclays Global Aggregate ex USD Bond Index and −1.60% for the Lipper International Income Funds Average. For the 12 months ended June 30, 2015, the fund returned −12.60% versus −13.19% for the Barclays Global Aggregate ex USD Bond Index and −6.81% for the Lipper International Income Funds Average. The fund's average annual total returns were −12.60%, 1.10%, and 2.58% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund's expense ratio was 0.83% as of its fiscal year ended December 31, 2014.
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redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
In terms of country and duration positioning (duration is a measure of sensitivity to interest rate changes), we added to the portfolio's duration in UK and eurozone bonds as valuations improved. In emerging markets, we maintained an overweight position in Mexico and added to exposure to Poland and Malaysia so that the allocations are now small overweights. In currencies, we increased our out-of-benchmark position in the U.S. dollar as we believe the Federal Reserve will tighten monetary policy this year. We also decreased our exposure to the euro as the Greek crisis escalated. In developing markets, we modestly reduced our overweight position in the Mexican peso and maintained exposure to the Indian rupee and the Chinese renminbi.
As interest rate policy paths in developed markets continue to diverge, with the European Central Bank and the Bank of Japan continuing to ease while the Fed and the Bank of England prepare to tighten, there will likely be increased volatility as well as opportunities for relative value trading between markets at different points in their interest rate cycles. We anticipate that the Fed's impending move to raise interest rates will lead to more strengthening in the U.S. dollar, but further gains may be limited given the extent of the dollar's appreciation in late 2014 and early 2015. In emerging markets, we see value in certain currencies that have recently lost ground against the U.S. dollar.