As the equity markets have fallen over the last few weeks, investors have flocked to bonds as away to protect their portfolios. Prices for U.S. Treasuries have skyrocketed, pushing already paltry yields lower. In addition, the Federal Reserve’s recent Operation Twist plan, which calls for the central bank to purchase long dated bonds, will drive down the yields on these assets. Those looking for income face a potential problem. with the cost of living steadily rising and other traditional bond products like the iShares Barclays Short Treasury Bond (NYSE:SHV ) paying next to nothing, retirees face a serious income crunch. Luckily, there are other ways to spice up a bond portfolio, without taking on huge levels of risk.

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The Number of Options Keeps Growing

If there is one thing that can be said about the growth of the exchange-traded fund industry, it’s that the average retail investor now has more choice. Everything from Canadian junior gold miners to emerging market small cap stocks is now available as an ETF. The bond world is no exception. With so much attention being thrust towards replacing lost wages, the number of options for investors looking for bond income has increased exponentially of the last few years. More than $20 billion of investor money sits in both the Vanguard Total Bond Market (NYSE:BND ) and iShares Barclays Aggregate Bond (NYSE:AGG ). While these funds follow a very broad index (Barclays Capital U.S. Aggregate Bond) and can be used as an overarching play, the bulk of their holdings are still in U.S. Treasury bonds.

However, these are not the only games in town. International bond asset classes, once reserved for institutional investors, are now available for the retail set. By tapping into some of these global choices, bond investors now have a way to add diversification benefits and potentially higher yields. Here are some of the new and interesting ways to add global bond exposure.

While many investors have embraced international investing for their stock allocations, bond investors have been reluctant so far. By ignoring the global bond market, investors are leaving benefits like dollar diversification and potential exposure to higher quality issuers on the table. The SPDR Barclays Capital International Treasury Bond (NYSE:BWX ) tracks 273 different sovereign bonds from investment grade countries with the largest allocations going to Japan, Italy and the United Kingdom. The ETF currently yields 1.82% and has an average maturity of nine years.

Investors may also be interested in the international corporate bonds. Just like U.S. firms, strong international companies like Siemens (NYSE:SI ) issue debt for various corporate purposes. Both the PowerShares International Corporate Bond (Nasdaq:PICB ) and SPDR Barclays Capital International Corp Bond (Nasdaq:IBND ) allow investors to tap into this market and yield 3.56% and 2.31%, respectively.

Don’t Forget Emerging Markets

Similarly, emerging market growth has been well documented on the equity side of a portfolio, but is lacking on the bond side. In many cases, a plethora of developing market’s fiscal situations is actually better than their developed twins. Both the PowerShares Emerging Markets Sovereign Debt (NYSE:PCY ) and WisdomTree Emerging Markets Local Debt (NYSE:ELD ) allow investors to tap into both dollar and local currency denominated EM bonds, while with funds like the PowerShares Chinese Yuan Dim Sum Bond (Nasdaq:DSUM ), investors can hone in on their exposure.

International Inflation Fighters

Finally, having a global defense against inflation is a prudent move and just like the United States, many other nations issue inflation protected securities. The SPDR DB International Government Inflation-Protected Bond (NYSE:WIP ) is the oldest and most heavily traded fund in the sector. The ETF tracks 71 different international TIPS and currently yields about 1%. iShares recently launched its version of an international inflation bond play with the iShares International Inflation-Linked Bond Fund (Nasdaq:ITIP ). However, the fund has yet to gain traction with investors.

The Bottom Line

For bond investors, the Federal Reserve’s recent actions of keeping interest rates low and buying longer dated bonds is causing quite a predicament. In order to get extra income, investors may want to open their portfolios up to international bonds. The preceding ETFs are a great way to gain additional yield, while gaining diversification benefits. (For additional reading, take a look at Top 6 Uses For Bonds .)

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