This Vanguard article included an infographic (see below) that shows the growth of international bonds as an asset class. If you were to consider the world’s investable market as split between bonds and equities, internationally-issued bonds are now the largest piece of the pie at 35%. This includes both government and corporate bonds.
Vanguard believes that holding international bonds is an important way add diversification to your portfolio, and in mid-2013 added international bonds to their Target Date Retirement and LifeStrategy all-in-one mutual funds (currently 20% of the total bond allocation). The Vanguard Total International Bond Index Fund Investor Shares (VTIBX) has an 0.23% expense ratio. I’m still not convinced of their necessity and don’t own any foreign bonds. Back in 2000, international bonds were still 19% of the global market, yet they took up 0% (none) of their Target Retirement and LifeStrategy funds.